The 2025/26 Federal Budget includes several measures that may affect individuals, not-for-profits, and businesses.
For not-for-profit leaders, the key is not just knowing what changed. It is understanding what may affect payroll, budgeting, cash flow, reporting, and planning.
This guide explains the main Federal Budget tax changes and financial measures to review, and what they may mean for your organisation.
Personal income tax changes
The Budget includes proposed reductions to personal income tax rates from 1 July 2026.
Based on the announced measures:
- the 16 percent tax rate is expected to reduce to 15 percent from 2027
- the 15 percent tax rate is expected to reduce to 14 percent from 2028
These changes may provide modest savings for individuals in lower income tax brackets.
For employers, this is worth monitoring as payroll settings and employee communications may need to be reviewed when changes take effect.
Medicare levy low-income threshold increase
The Budget also includes an increase to Medicare levy low-income thresholds.
This is designed to ensure lower income earners remain exempt from the Medicare levy or pay a reduced rate where eligible.
For payroll and planning purposes, organisations should stay aware of changes that may affect employee tax outcomes and year-end reporting.
Student loan changes
The Budget includes proposed changes to student loan arrangements, including:
- a proposed reduction in outstanding student loan debts, subject to legislation
- an increase to the repayment income threshold
For employers, this may affect payroll withholding settings once implemented.
It is important to ensure payroll systems are kept up to date and reviewed as new thresholds apply.
Energy bill relief for small businesses
Eligible small businesses may receive energy bill rebates during the relevant period.
For organisations managing tight budgets, these rebates may provide some short-term relief.
The practical step is to ensure any rebate is reflected correctly in budgets, forecasts, and cash flow planning.
Housing and community service impacts
Changes to housing-related programs may be relevant for not-for-profits that provide housing support, financial counselling, or community services.
If your organisation works in this space, review whether any program changes affect:
- service demand
- funding assumptions
- client support models
- financial planning for the year ahead
Small business and social enterprise support
The Budget includes measures aimed at supporting small businesses, franchisees, and social enterprise initiatives.
For not-for-profits operating social enterprises, this may be relevant where funding, lending, or employment initiatives form part of your model.
Any opportunity should be reviewed carefully against eligibility, timing, and long-term financial sustainability.
What this means for not-for-profits
Budget announcements can create practical flow-on effects for not-for-profits.
Key areas to review include:
- payroll settings and employee tax treatment
- cash flow forecasts
- grant budgets and funding assumptions
- board reporting and risk updates
- compliance calendars and reporting deadlines
A structured review helps your organisation understand what is relevant and what action is needed.
How to prepare
1. Review payroll and tax settings
Check whether any announced changes affect payroll configuration, employee withholding, or reporting.
2. Update budgets and forecasts
Reflect any known rebates, levy changes, funding shifts, or payroll impacts in your planning.
3. Brief your board or committee
Provide a clear summary of which Budget measures may affect your organisation.
4. Monitor legislation and implementation timing
Some measures may depend on legislation or further guidance, so avoid making final decisions until details are confirmed.
5. Seek professional review where needed
If a measure affects tax, payroll, or funding, it is worth reviewing the details before applying changes.
What good looks like
A well-prepared organisation will have:
- clear understanding of which measures apply
- updated payroll and reporting processes where needed
- budgets and forecasts adjusted for relevant changes
- board-ready information on financial impacts
- documented next steps for compliance and planning
Start a conversation
Federal Budget changes can feel broad, but the right response is usually practical and specific.
Hopscotch Accounting supports not-for-profits and SMEs with payroll, budgeting, reporting, and compliance reviews so leaders can understand what changed and what to do next.
Start a conversation to review how the latest Budget measures may affect your organisation.
FAQ’s
Federal Budget tax changes can affect not-for-profits through payroll settings, employee tax treatment, funding assumptions, compliance planning, and cash flow forecasts.
Yes. If Budget measures affect funding, payroll, rebates, or operating costs, not-for-profits should review and update their budgets and forecasts.
Payroll systems should be updated once measures are confirmed and implementation guidance is available. This helps ensure withholding and reporting are applied correctly.
