Treasurer Jim Chalmers highlighted addressing the cost-of-living crisis as a top priority in the latest federal budget. He noted that global events, including tensions in the Middle East, exacerbate pressures on Australians. “We understand this crisis is adding to the cost-of-living pressures facing Australians,” Chalmers stated. “That’s why we are taking some of the sting out of global price rises.”

Tax Relief for Workers

The budget introduces the Working Australians Tax Offset (WATO), a permanent $250 annual tax offset for workers starting from the 2027–28 income year. This raises the effective tax-free threshold to nearly $19,985 for most workers, or up to $24,985 for those eligible for the Low Income Tax Offset. Over 13 million workers will benefit, allowing them to retain more of their earnings.

Combined with prior tax cuts, an average earner on $81,245 will see $1,978 less tax in 2026–27 and $2,496 annually from 2027–28 compared to 2023–24 rates.

Instant $1,000 Tax Deduction

From 2026–27, workers gain an instant tax deduction of up to $1,000 for work-related expenses without receipts. This simplifies claims for 6.2 million taxpayers, delivering an average $205 saving. Those with higher deductions can claim as usual, with other deductions like charitable donations remaining available.

Further Tax Rate Reductions

Additional cuts lower the 16% rate on income between $18,201 and $45,000 to 15% from July 2026 and 14% from July 2027. Average earners on $79,000 receive $268 extra relief in 2026–27 and $536 annually thereafter, totaling $2,190 yearly from 2027–28. Over the period from 2024–25 to 2036–37, average workers pay up to $38,977 less tax relative to prior settings. Budget documents emphasize these measures combat bracket creep and provide ongoing relief.

Healthcare and Medicare Adjustments

The Medicare levy low-income thresholds for singles, families, seniors, and pensioners rise by 2.9% from 2025–26, exempting or reducing levies for over 1 million low-income Australians.

Affordable Medicines

A $5.9 billion investment expands Pharmaceutical Benefits Scheme (PBS) listings for treatments including cystic fibrosis, chronic kidney disease, cancers, and COVID-19 antivirals. General PBS co-payments drop to $25, with concessional rates frozen at $7.70 until 2030. Keytruda for cervical cancer joins the PBS, slashing costs from over $15,400 per script.

$2.7 million funds new Medicare items for midwives offering long-acting reversible contraceptives. Public dental services for low-income adults receive permanent $431 million funding under state-determined eligibility.

Other Relief Measures

Housing reforms to negative gearing and capital gains tax aim to assist 75,000 into homeownership over the next decade, targeting young people and families amid shortages.

Fuel excise halves for three months via a $2.9 billion package, cutting petrol and diesel rates by 32 cents and saving nearly $23 per 65-litre tank. Heavy vehicle charges drop to zero temporarily.

Paid Parental Leave extends to six months from July 2026, leaving families $14,000 better off than in 2022 projections. $11.4 billion boosts bulk billing incentives, targeting 90% of GP services by 2030.

Support for Pensioners

While no age pension-specific measures stand out, pensioners benefit from cheaper medicines, higher Medicare thresholds, and the free RSV vaccine Arexvy on the National Immunisation Program for those over 65. $3.7 billion expands aged care with 5,000 additional beds yearly for low-means residents, plus more packages and improved services.