Firstly, we had the Budget that we didn’t think we were going to have, followed by the Opposition Leader, Peter Dutton’s response to the budget and then (no surprise to anyone) the Federal election was called early Friday morning for Saturday May 3.

What does this mean?

Most of the measures contained in the Budget had already been announced. However, there was one surprise which was the announced personal tax cuts. These tax cuts have already been legislated – there will be a reduction of 1% (in the lowest tax bracket) from 16% to 15% from 1 July 2026 and a reduction of another 1% to 14% from 1 July 2027.  It’s a modest tax cut, touted to try and alleviate the impact of “bracket creep”. It should be noted that it’s a tax cut for all – it hasn’t been managed by way of an offset for low/middle income earners which has been done in the past.

The Opposition has said they won’t support the tax cuts and have gone as far as to say they will repeal the legislation if they get in. Voters are likely to be reminded of this many times over the next five weeks.

The energy bill relief will continue for another six months, reducing household and small business energy bills by $150 from July. The Opposition has said they won’t stop this relief.

The Opposition no doubt will be trying to sell their economic credentials – at the moment we are hearing a lot about how Australians don’t appear to be better off after three years of Labor and there are budget deficits predicted as far as the eye can see.

In their reply speech, the Opposition announced a reduction in the Fuel Excise tax for 12 months which will start soon after the election. This reduction will provide people with immediate cost savings. It’s also being noted by the Opposition that the costs of a number of other goods and services which rely on petrol as part of their supply chain will also decrease, such as fresh food.

The sting in the tail, however, is that (as it currently stands) this reduction is only for 12 months. This means, in 12 months’ time the cost of fuel will increase.  This could have a number of knock-on effects such as an increase in inflation and possibly the Reserve Bank of Australia’s interest rate strategy.

It could be argued that the energy bill relief and the fuel excise reduction will operate to reduce inflation in the short term but will provide a bump to inflation when they are removed.  However, if people have more cash in their pocket from reduced petrol costs or energy bills, maybe they will spend more now. The tax cuts could also be seen as inflationary. However, the impact of these cuts is more than 12 months away and are modest at best.

Anything for small business?

There was nothing notable in the Budget or any announcements for small business. The Opposition has previously announced that they will offer small businesses tax deductions of up to $20,000 for business-related meal expenses. However, there isn’t much detail on this policy as yet.

Notably, there was some legislation passed by Parliament just before the election was called which is relevant to small business:

• From 1 July 2025 the General Interest Charge and Shortfall Interest Charge which is the interest that is charged by the ATO on outstanding tax debts will no longer be tax deductible. This means taxpayers will need to think carefully about either not paying or entering into payment plans for outstanding tax debts.
• The instant asset write-off amount has been legislated for the 2025 financial year at $20,000 – this was announced in the 2024-25 budget. The Opposition has said they will raise this limit to $30,000 if re-elected.

Five weeks is a long time in politics – we will no doubt be bombarded with information over the coming pre-election period.  One thing seems certain, we won’t be making a decision based on small business policies or any structural tax reform.  Cost of living, health and energy seem to be where the policies are being devised, and the money is being spent.

If you have any questions, please contact your Holman Hodge Adviser