Treasurer Jim Chalmers has released the 2025-26 Federal Budget, presenting it as a response to rising living costs and a slowing economy.
With an election approaching, the budget is a mix of short-term support and longer-term policies. For SMEs the impact is uneven. While there are some helpful measures, significant challenges remain. Here’s a breakdown.
Wins for SMEs
Some relief for power costs
Around one million small businesses will receive a $150 energy rebate, split into two payments later this year. This follows the current $300 rebate, which ends mid-year.
The government has allocated $1.8 billion for this measure to help businesses manage power bills, especially with electricity prices expected to rise by up to 8.9% in some areas. While helpful, this is a temporary fix rather than a lasting solution for high energy costs.
Treasurer Jim Chalmers points to past rebates as a key tool for lowering costs, stating, “Past rebates cut electricity bills by 25%.” However, he has made it clear that this support will not be permanent, urging businesses to plan for future cost increases.
End of non-compete clauses
The government is removing non-compete clauses, which often prevent workers from switching jobs for a set period after leaving an employer.
While this change is framed as a way to increase wages, it also benefits SMEs by making it easier to hire skilled workers. Industries such as hospitality, construction, and retail , where competition for experienced staff is high , stand to gain the most. Chalmers argues, “It’s about lifting wages,” but for SMEs, this equates well to fewer hiring barriers and a more flexible workforce.
Green tech incentives
The budget includes $5 billion for clean energy and green technology initiatives under the Future Made in Australia plan. However, only $20 million of that funding is confirmed so far. Paul Henaghan, Managing Director at Cohesity Australia and New Zealand, sees an opportunity for SMEs to cut costs by improving data storage and energy efficiency.
“Sustainability measures are no longer an optional feature as consumers increasingly expect organisations to align with a more sustainable operating model. By focusing on strategies such as data deduplication, data minimisation, and data deletion, IT teams can significantly reduce the amount of power they are using to manage their data.”
He encourages SMEs to collaborate with technology providers to leverage advanced data management tools, reducing energy costs while also ensuring cybersecurity. “Done right, Australian businesses are on the right track to advance their sustainability agenda for a greener and cyber-resilient future,” Henaghan adds.
Economic outlook
The government predicts inflation will fall to 2.5% by late 2025, with economic growth expected to reach 2.25% next year. If these projections hold, SMEs could see lower borrowing costs and improved consumer confidence, leading to more spending.
Losses for SMEs
No direct tax cuts for businesses
While the budget includes tax cuts, they primarily benefit individuals rather than businesses. From July 2026, income tax rates for those earning between $18,201 and $45,000 will drop from 16% to 15%, then to 14% by 2027. While this could increase consumer spending, there are no specific tax relief measures for SMEs, leaving business owners without direct financial support.
H&R Block’s Director of Tax Communications, Mark Chapman, describes the tax cuts as “pure eye candy,” noting that the financial benefit is modest—worth about $5 per week in 2026 and $10 per week in 2027. He adds that the policy aims to counter bracket creep but does not provide immediate relief for businesses.
Rising cost of living could impact spending
Joel Gibson, a consumer finance expert at Zyft, warns that everyday expenses such as insurance and groceries continue to rise. “The 2025 federal budget will offer some cost of living relief for Aussies, but the government has fallen short of tackling the inflated cost of everyday essentials, from groceries to insurance and other bills,” he says.
On average, grocery bills have increased by $3,000 per household over the past three years, while insurance premiums remain high. Although the budget includes tax cuts, energy rebates, and childcare subsidies, Gibson argues these measures do not fully address financial stress. “No one is coming to our rescue.
The real power lies in the hands of Aussies to take control of their finances. Whether it’s switching energy providers, shopping around for better insurance, or simply taking advantage of sales events, there are tools and tactics Aussies can use to make their money go further.” For SMEs, this equates well to continued caution in consumer spending, which could impact revenue for businesses reliant on discretionary spending.
Energy rebate is temporary
The $150 rebate offers short-term relief, but it does not provide a long-term solution for rising energy costs. SMEs will still need to find ways to manage power expenses once the rebate ends.
Instant asset write-off reduction
Small businesses will face challenges after June 30, 2025, when the instant asset write-off will revert to $1,000 from the current $20,000 threshold. Chapman warns, “Small businesses have a very limited opportunity to take advantage over the next three months, assuming the government can get its $20,000 threshold through Parliament.” This change will limit businesses’ ability to invest in new equipment and assets.
National debt and limited future support
With national debt exceeding $1 trillion and a budget deficit of $42 billion, the government has limited financial room to offer further SME support. The Business Council of Australia has welcomed the tax cuts but argues that more direct assistance for businesses is needed to sustain economic growth.
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Discover how the 2025 budget impacts Australian SMEs, highlighting both the wins and challenges to help business owners understand its full effect News, Budget Dynamic Business
