What’s New for the 2025 Tax Return? | Key Changes from July 1, 2025

As we kick off the new 2025–26 financial year, it’s time to start thinking about lodging your 2025 tax return (for the year ended 30 June 2025).

This year brings several key changes that will impact individuals and small businesses alike — from income tax cuts to shifts in allowable deductions.

Here’s a roundup of what’s new and what to expect when lodging your 2025 tax return:

1. Stage 3 Tax Cuts Are Here

One of the most significant changes is the revised Stage 3 tax cuts, which apply from 1 July 2024, meaning they affect your 2025 tax return.

The updated personal income tax rates for 2024–25 onwards are:

Taxable Income	Tax Rate
$0 – $18,200	Nil
$18,201 – $45,000	16%
$45,001 – $135,000	30%
$135,001 – $190,000	37%
$190,001+	45%

✅ What this means: Most taxpayers will benefit from a lower average tax rate, especially those earning between $45,000 and $135,000. This simplifies the tax brackets and reduces overall tax payable.

2. Deductions: What’s Changed?

🔹 Work from Home (WFH) Deduction – Fixed Rate

The ATO has locked in the revised 67c per hour fixed rate for those claiming WFH expenses, which covers electricity, internet, mobile & home phone, stationery, and computer consumables.

You must keep a record of all hours worked from home, not just a 4-week sample.

💡 Assets like desks, laptops, and chairs must still be depreciated separately.

🔹 Self-Education Deductions

The $250 self-education expense threshold (non-deductible portion) was officially scrapped in 2022, but some taxpayers are still unaware. As of 2025, all eligible self-education expenses can be claimed in full, subject to usual rules.

🔹 Motor Vehicle Expenses – Cents per Kilometre Method

From 1 July 2024, the ATO has increased the cents per kilometre rate to 88 cents/km for the 2024–25 income year.

• This method allows individuals to claim up to 5,000 business kilometres per car, per year, without needing detailed logbooks, which means a maximum tax deduction of $4,400.

• The rate is all-inclusive (fuel, servicing, registration, insurance, depreciation).

💡 This is an increase from 85 cents/km in the 2023–24 year.

3. Rental Property Owners – Extra Scrutiny

The ATO has flagged rental properties as a key focus area in 2025.

Key points:

• Interest deductions must be apportioned properly if any redraws or mixed-purpose loans are involved.

• Depreciation claims must be supported by a valid depreciation schedule.

• Repairs vs capital improvements must be clearly distinguished.

• Holiday homes and short-term rentals must pass the genuine availability test.

 4 . PAYG and Withholding Adjustments

Employees may notice a change in their take-home pay due to the new tax brackets. Employers must ensure updated PAYG withholding tables are used from 1 July 2024 onwards.

5. Other Notable Items

• HECS/HELP Indexation Reduced: From 1 June 2023, indexation is now linked to the lower of CPI or Wage Price Index, reducing student debt increases.

• First Home Super Saver Scheme (FHSSS) withdrawal cap remains at $50,000 for individuals.

• Medicare levy thresholds for low-income earners have been increased slightly to reflect inflation.

Key Takeaways

• Most taxpayers will benefit from lower tax rates due to revised Stage 3 cuts.

• WFH deduction rules require accurate record-keeping.

• Rental property deductions are under heavy ATO review.

• Small businesses can still access the $20k instant asset write-off.

• Super contribution caps have increased — useful for last-minute tax planning.

Need help preparing your 2025 return? We’re here to help you navigate the new tax year and maximise your entitlements. Contact us to schedule a meeting to see how we can help you.