The 2025 Federal Budget: What It Means for SMEs

Economic overview

The Australian Federal Budget for 2025 projects a $27.6 billion deficit, a reversal from previous surpluses and driven by falling commodity prices and global trade tensions. The government anticipates slow global economic growth—just 3.25% over the next three years—and is focused on mitigating the impacts by implementing measures to stimulate domestic consumption. 

Tax reforms

To facilitate this by alleviating financial pressure on households, the government has announced unexpected tax cuts totalling more than $17 billion over five years. These cuts aim to increase disposable income and encourage discretionary spending without exacerbating inflation.

Support for SMEs

This year’s budget introduces several measures impacting small and medium-sized enterprises (SMEs). While designed to offer support, there are concerns that these provisions may be inadequate amid ongoing economic challenges.​

Instant asset write-off scheme

The government’s decision not to extend the instant asset write-off scheme is a significant development. Small businesses with an annual turnover under $10 million could previously claim an immediate deduction for assets costing up to $20,000, rather than depreciating them over time. Removal of this legislation will see the value threshold revert to $1000 from 1 July 2025, potentially lessening business investment.

Non-compete clause ban

The government plans to ban non-compete clauses for employees earning below $175,000 annually. Despite the intent of encouraging entrepreneurship and labour mobility—with the added hope of boosting wages and fostering innovation—there are still concerns about retaining talent and safeguarding proprietary information in SMEs.

Energy bill relief

Along with households, approximately one million small businesses will receive energy bill rebates of $150 from 1 July 2025. While this offers some relief, the reduction from the previous $325 rebate may limit its effectiveness in offsetting rising energy costs. ​

Regulatory and compliance measures

• Director Identification Number (DIN) system: The budget allocates $207 million over two years to enhance the Australian Securities and Investments Commission’s (ASIC) backend systems. This funding will integrate the DIN scheme with company registers, facilitating the identification and prevention of illegal phoenixing activities—the liquidation, winding up, or abandonment of a company to avoid paying its debts—for which additional dedicated funding has been earmarked.
• Crackdown on construction: An additional $3 million over four years is designated for ASIC to deter illegal phoenixing, particularly in the construction sector. This measure seeks to protect legitimate businesses from unfair competition and uphold industry integrity.
• Addressing the shadow economy: The Australian Taxation Office (ATO) will receive $155.5 million over four years to expand efforts against the shadow economy. This initiative aims to level the playing field for compliant SMEs by targeting businesses operating outside legal frameworks.
• Increased franchise oversight: The Australian Competition and Consumer Commission (ACCC) is set to receive a boost of $7.1 million over the next two years to enforce the Franchising Code of Conduct.

Other measures

The government announced a $165 million relief plan for the hospitality sector, including a freeze on the biannual excise tax on alcohol from August 2025 to August 2027, which promises to curb rising prices, supporting local jobs and small businesses.

Additional funding has also been allocated to reduce drug prices and enhance Medicare services, aiming to improve healthcare accessibility and affordability.

The ‘Buy Australian’ campaign has been allocated $20 million to encourage consumers to purchase locally made products and services, though full details of the scheme have not been released.

What it means

While the 2025 Federal Budget offers some immediate relief for SMEs, the long-term outlook remains uncertain. Businesses will need to navigate these changes carefully, balancing short-term adjustments with sustainable growth strategies. In times of economic volatility, reacting to immediate shifts can be tempting, but success often comes from taking a measured approach—investing wisely, managing risks, and planning for the future.

Seeking professional financial and business advice remains crucial in ensuring stability and long-term success in an evolving economic landscape. If you’d like some help in planning your future, please get in touch with your F&Co accountant.