26 March 2025
We watched the 2025 federal budget with interest. Last year, Treasurer Jim Chalmers put early childhood education in the spotlight, with new funding initiatives designed to support the sector and its workers. So we wanted to see how that was going, and if there was any more support in store.
Well, there is, and there isn’t. Much of what Chalmers spoke about was a recap of recent measures, but his speech did offer some insight into the path ahead for workers in the early learning sector. But there are also implications for business owners. Here’s what happened.
Expanding childcare subsidies
The existing Child Care Subsidy activity test is on the way out. From 1 January 2026 it’ll be replaced by a previously announced Three Day Guarantee that moves away from considering how many hours parents work or study, and towards a more universal approach that doesn’t factor this in.
The government will still cover a percentage of the costs based on family income, just like under the CCS system, but it’s expected to widen access, freeing up more parents to return to work or increase their hours, which will help boost household incomes and productivity. This is likely to increase demand for childcare, and for early years education staff.
Reducing childcare deserts
The budget announced a plan to build more childcare centres in areas where there aren’t enough, expanding access across the country to ensure more opportunities for children in regional areas.
Banning non-compete laws
The government believes early years educators should be empowered to seek better-paid roles or career progression without contractual restrictions and thinks this could raise median wages and increase Australia’s GDP by $5 billion.
So it’s bye-bye to those widely used non-compete laws that restrict employees from working for competitors or starting a competing business after leaving their job. Early years educators are likely to find themselves with more bargaining power and benefits.
For business owners in the sector, this isn’t such great news. Staff will likely cost more, leave roles sooner, and may even set up in competition. Higher overheads may also be passed on to parents and families in the form of higher fees – although the government’s wage subsidy should help offset them in the short-term.
Same old pay rise
Chalmers reaffirmed the government’s commitment to the two-year sector wage increases, but didn’t add anything new to them. For the first year, the increase was 10% above award rate and from May 2025 it’ll rise to 15% above award. Nothing has been announced after that.
But lower income tax!
Lower-paid staff in particular are likely to welcome the raft of cost-of-living support measures that form the centrepiece of the budget platter. Help yourself to a morsel of energy bill rebate, a slice off of your student debt, a helping hand with housing, cheaper medicines and even a smaller plate of income tax… because everyone’s getting a tax break from 1 July 2026!
A further reduction in income tax for all Australians has been one of the biggest surprises, along with a bit of hope for the Aussie economy. From 1 July 2026 the 16% tax rate, which applies to taxable income between $18,201 and $45,000, will be reduced to 15% delivering a tax cut for everyone earning over $18,201. Then, from 1 July 2027, this tax rate will be reduced again down to 14%.
This leaves the average worker with an extra $268 in their pocket in 2026–27 and $536 more per year from 2027–28, compared to 2024–25.
A helping hand with energy
The $150 energy rebate scheme has been extended through to 31 December 2025 – you’ll receive this in two $75 quarterly bill discounts. Small business owners can also access energy efficiency grants to fund upgrades that keep bills lower.
Reducing student debt
University graduates will benefit from lower student debt and repayment thresholds. The government plans to wipe 20% off all HELP fees – removing $16bn from the student loan accounts of 3 million people. The reduced fees will come in from 1 July subject to legislation.
The earnings threshold is also increasing, meaning you can earn more before you have to start paying back your student loans. It’s currently $54,435 a year, but from 1 July it’ll rise to $67,000 a year. As long as all this gets approved into legislation after the election, it’ll make it that bit easier to study, progress and get qualified – nice!