2025 Levy Updates: How New Changes Affect Australian Households

Australians are no strangers to levies—those special-purpose taxes that fund everything from healthcare to disaster relief. But 2025 is shaping up to be a pivotal year for levy changes, with several updates set to impact households and businesses alike. Whether you’re an employee, small business owner, or investor, understanding these shifts is crucial to managing your money and compliance.

What’s Changing: Key Levies Updated in 2025

The start of 2025 has seen several government-announced levy adjustments, most notably:

• Medicare Levy Increase: The Federal Government’s 2024-25 budget confirmed an increase in the Medicare levy from 2% to 2.2% of taxable income, effective July 1, 2025. This is aimed at funding the growing costs of the public health system, particularly in the wake of ongoing pandemic-related pressures.

• Disaster Recovery Levy: Following the severe 2024 bushfire and flood seasons, a temporary Disaster Recovery Levy will apply from August 2025 for individuals earning over $100,000 and businesses with profits above $2 million. This levy is expected to sunset after 18 months.

• Environmental Levies: Several states—including New South Wales and Victoria—have raised environmental waste levies to accelerate landfill reduction and fund circular economy initiatives. NSW, for example, has increased its landfill levy by 8% from January 2025.

These changes reflect both short-term responses to national emergencies and long-term policy shifts towards sustainable funding models.

How the New Levies Affect Households and Businesses

The impact of levy changes will vary depending on your circumstances:

• For Employees: The Medicare levy increase means an individual earning $80,000 will see their annual levy rise from $1,600 to $1,760. For high-income earners, the additional Disaster Recovery Levy may add a further 0.25% to taxable income over $100,000.

• For Businesses: Companies with profits above $2 million will need to account for the Disaster Recovery Levy, which could add significant costs, especially in sectors like construction and retail that have bounced back post-pandemic.

• For Property Owners and Investors: Increased environmental levies are expected to raise landfill costs and could flow through to higher council rates or waste service fees, especially for strata and commercial properties.

It’s worth noting that the ATO has updated its levy threshold tables for 2025, potentially shifting eligibility for some low-income earners and retirees. Check your eligibility for levy reductions or exemptions, especially if your income has changed in the past financial year.

Strategies to Manage Levy Impacts in 2025

While levies are often unavoidable, there are steps Australians can take to minimise their impact:

• Salary Packaging: Consider salary packaging options—such as superannuation contributions or novated leases—that may reduce your taxable income and hence your levy liability.

• Tax Planning: For business owners, strategic tax planning before June 30 may help keep profits below levy thresholds. Consult with your accountant about eligible deductions or deferred income strategies.

• Waste Management: Property owners can reduce waste service costs by embracing recycling, composting, or community waste-sharing programs—actions that also support environmental goals targeted by the new levies.

Beyond personal strategies, it’s important to stay informed. The government has signalled that further levy reforms could be on the horizon, especially as climate and health funding needs evolve.

The Big Picture: Levies and Australia’s Fiscal Future

Levies aren’t just a line on your tax statement—they reflect Australia’s collective response to national challenges. The 2025 updates are designed to shore up essential services, rebuild after disasters, and accelerate the transition to a greener economy. While they may mean slightly higher costs in the short term, they’re also an opportunity for Australians to reassess budgets, adopt smarter financial strategies, and contribute to broader societal goals.