A New Term, A Familiar Tax Agenda: Labor’s Election Win and What it Means for You
Labor’s victory in the May 2025 federal election wasn’t built on big tax promises, but it did put a big emphasis on trying to ease the cost of living for everyday Australians.
In fact, Prime Minister Albanese made it clear during the campaign that they’re “not getting ahead of ourselves” when it comes to new tax changes. After helping over 200,000 Australians navigate tax changes through multiple election cycles, we can tell you that this measured approach is actually refreshing.
The reality is that most of Labor’s tax agenda was already locked in before the election. Some changes are already happening, others are coming soon, and a few are still waiting for Senate approval. Let’s break down what’s real, what’s promised, and what might get stuck in political negotiations.
What’s Already Happening: Changes You Can Bank On
Although there are a variety of tax changes you should know about, some of them are already legislated and budgeted for, while others are still a little up in the air. These are a few of the ones you can bank on:
Stage 3 Tax Cuts (Already in Effect)
Modified Stage 3 tax cuts have been in effect since July 1, 2024. These aren’t election promises anymore — they’re reality, and you should be seeing the benefits in your pay packet already.
Here’s what changed in 2024:
- $18,201 to $45,000: Tax rate dropped from 19% to 16%
- $45,001 to $135,000: Tax rate dropped from 32.5% to 30%
- $135,001 to $190,000: New 37% bracket
- $190,001 and above: Still 45%
These savings are appearing in your take-home pay right now, and if you’re earning under $190,000, will likely increase again next year. How good is that?!
Small Business Write-Offs Extended
This one was up in the air for much of the election campaign, and there was a lot of back-and-forth between the Coalition and Labor, each trying to one-up the other. The good news is this: The $20,000 instant asset write-off for small businesses has been extended through June 30, 2026. This gives you another year of certainty for equipment purchases and technology upgrades. We love that for small businesses in Australia! Time to take advantage, if you haven’t already.
Note: Although Labor has committed to extending the policy, we are yet to see it in the budget. What does that mean? Read more about it in our article $20,000 Instant Asset Write-Off Ends 30 June 2025 — Or Does It?
What’s Officially Coming: Legislated Changes
The tax changes below are due to come into effect in coming years, and have already been legislated, so you can be fairly certain they’ll happen after Labor’s election win (although anything can change, which is why we recommend keeping an eye on the ITP blog for any future updates).
More Tax Cuts in 2026 and 2027
These future cuts have been announced in the Federal Budget and are expected to be legislated soon:
- July 1, 2026: The 16% rate drops to 15% for earnings between $18,201-$45,000
- July 1, 2027: Another drop to 14% for the same bracket
What does that mean for your pay packet? Here’s the figures directly from the ALP’s website:
- All 14 million Australian taxpayers will receive a tax cut, on top of our tax relief that’s already rolling out.
- Every Australian taxpayer earning above $45,000 (around 80 per cent of taxpayers) will get an extra tax cut of $268 in 2026–27 and $536 from 2027–28, compared to 2024–25 settings.
- A worker on average earnings ($79,000) will get an extra tax cut of $268 in 2026–27 and $536 per year from 2027–28.
- Every Australian taxpayer earning between $18,201 and $45,000 will get an extra tax cut of up to $268 in 2026–27 and up to $536 from 2027–28, compared to 2024–25 settings.
- A person earning $40,000 will get an extra tax cut of $218 in 2026–27 and $436 every year from 2027–28.
Combined with Labor’s first round of tax cuts:
- The average tax cut is expected to be around $43 per week or more than $2,200 in 2026–27, and around $50 per week or more than $2,500 in 2027–28, compared with 2023–24 settings.
- An average earner will receive total tax relief of $1,922 in 2026–27 and $2,190 per year from 2027–28, compared to 2023–24 tax settings.
- The average income earner will pay around $30,000 less in tax to 2035–36, compared to 2023–24 settings.
$1,000 Automatic Work Deduction (Starting 2026-27)
This one is a game-changer for simplifying tax returns. From the 2026-27 financial year, everyone who earns an income from “personal exertion” gets an automatic $1,000 deduction for work expenses. No receipts required.
How it works:
- Automatic $1,000 deduction for work-related expenses
- No documentation needed for amounts under $1,000
- You can still claim more with receipts if your expenses exceed $1,000
- Other deductions like charity donations work as normal
Example: For someone in the 30% tax bracket, this saves $300 annually with zero paperwork. The details are still being worked out, but the commitment is solid.
Payday Super (Starting July 2026)
Employers will be required to pay superannuation at the same time as wages, rather than quarterly. This means your super contributions will hit your account much faster, giving you more time for compound growth.
For comprehensive guidance on maximising all your deductions, check out our ultimate guide to tax deductions.
What’s Still Being Negotiated: The Uncertain Bits After Labor’s Election Win
The following changes have been proposed by the Labor Government, mostly during the election campaign, but they’re yet to be given the official green light. Take each of these with a grain of salt until you see them come through officially.
Super Tax on High Balances
The controversial doubling of tax on super earnings above $3 million is still waiting for Senate approval. The original bill lapsed when parliament was dissolved for the election, so it needs to be reintroduced.
What it would do:
- 30% tax on earnings from super balances over $3 million
- Affects about 80,000 people (0.5% of super holders)
- Would apply to both realised and unrealised gains
- Expected to raise $2.3 billion in its first full year
The Senate problem: Labor needs either Liberal or Greens support to pass this. The Liberals won’t support it, and the Greens want the threshold lowered to $2 million instead of $3 million. This creates a tricky negotiation.
Our advice for affected clients: Start planning now. Even if the details change, some version of this tax is likely to pass. We’re already helping clients with portfolio rebalancing and pension withdrawal strategies to minimise the impact.
Student Debt Relief
Labor has promised a 20% cut to student debt, which would be their “first priority” for legislation. This affects HECS-HELP debt, not general bank loans. While not strictly a tax measure, it impacts take-home pay for anyone with student debt.
What Might Change Under Green Influence
The Greens still hold significant power in the Senate, which could influence Labor’s agenda. Their main tax policies include:
Wealth taxes on billionaires: A 10% annual tax on net wealth for Australia’s 150 richest people. This is unlikely to affect our typical clients but could influence broader tax policy.
Property investment changes: The Greens want to limit negative gearing and the 50% capital gains discount to one investment property per person. Labor might consider some version of this if they need Green support for other legislation.
Corporate tax increases: Various proposals for mining companies and large corporations that are unlikely to directly affect individual taxpayers.
Super threshold reduction: The Greens want the super tax to apply at $2 million instead of $3 million, which would affect many more Australians.
What This Means for Your Tax Planning
We know that tax planning can be tricky when you’re unsure about which of these policies is likely to come to pass, and which will be moved to the scrap heap. That’s why we suggest talking to one of our tax professionals before you make any significant changes. We can help you better understand what applies to you, and how to plan for the future even when it’s a little uncertain. In the meantime, here are our top tips for tax planning:
Immediate actions you can take:
- Check your pay: Make sure you’re getting the Stage 3 tax cut benefits
- Plan equipment purchases: Take advantage of the extended $20,000 write-off through June 2026
- Prepare for future returns: From 2026-27, most taxpayers claim more than $1,000 in work related expenses so continue to keep all tax receipts rather than rely on the Government’s proposed $1,000 work expense claim
sas you may shortchange yourself if you really have more expenses
If you have high super balances:
- Consider your strategy before any super tax changes take effect
- Review your pension phase planning
- Look at portfolio allocation between growth and income investments
For everyone else:
- The changes are mostly positive and automatic
- Focus on maximising current deductions while the rules are complex
Why professional advice matters: Even with the tax simplifications coming, the transition period creates complexity for almost everyone. The interaction between current rules, upcoming changes, and potential Senate negotiations means professional guidance can save you big money.
The key insight from Labor’s measured approach is that dramatic tax reform isn’t on the agenda. Instead, we’re seeing targeted improvements that make the system fairer and simpler for most people. That’s actually good news for tax planning, and means you can make decisions with more confidence about what’s coming.
For personalised advice on making these changes work for your situation, book an appointment with ITP to discuss your specific circumstances. Or explore our comprehensive tax return services to ensure you’re getting every benefit available under both current and future rules.
Disclaimer: This article is for information only and doesn’t constitute financial or tax advice. Tax laws are complex and everyone’s situation is different. For personalised guidance, speak with a qualified tax professional who can analyse your specific circumstances.