The Australian Government’s first major tax reform package has now passed both Houses of Parliament.
This is an important point: these measures are no longer just Budget announcements, policy proposals or political discussion points. The legislation has passed Parliament and is now awaiting Royal Assent. Once Royal Assent is given, the Bills become Acts of Parliament and form part of Australian law.
For taxpayers, property investors, employees, small business owners and SMSF trustees, these changes are significant and should now be factored into tax planning.
What legislation has passed Parliament?
The key legislation is the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026.
The companion legislation is the Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026.
Together, these Bills form the first tranche of the Government’s tax reform package.
The legislation includes changes affecting:
* individual taxpayers;
* employees claiming work-related deductions;
* residential property investors;
* capital gains tax;
* small business CGT concessions; and
* SMSF borrowing arrangements.
1. Working Australians Tax Offset
The legislation introduces a new Working Australians Tax Offset.
This is designed to provide tax relief for working Australians from the 2027–28 income year.
The Government has described this as a permanent tax offset of up to $250 per year for eligible workers.
For individual taxpayers, this means further tax relief will be delivered through the tax system, in addition to other income tax changes already legislated.
2. $1,000 instant tax deduction for workers
The legislation also introduces a $1,000 instant tax deduction for workers.
This measure is intended to simplify work-related deduction claims for many employees.
Importantly, this does not mean taxpayers who genuinely incur higher deductible work-related expenses are limited to $1,000. Employees who have deductible expenses above that amount should still be able to claim their actual deductions, provided they satisfy the normal substantiation and deductibility rules.
For many employees, however, the new deduction may reduce the need to keep detailed records for smaller work-related expense claims.
3. Capital gains tax reform
The legislation changes the way capital gains are taxed for individuals, trusts and partnerships.
The existing 50% CGT discount is being replaced for future gains by a system based on cost base indexation, so that only real gains above inflation are taxed.
The Government has also introduced a minimum 30% tax rate on certain capital gains realised on or after 1 July 2027.
These CGT changes are significant and may affect future tax planning for:
* investment properties;
* shares and managed funds;
* business asset sales;
* trust distributions involving capital gains; and
* long-term investment portfolios.
Clients who are considering selling assets in the next few years should obtain advice before making decisions based only on the old CGT discount rules.
4. Negative gearing changes for residential property
The legislation also reforms future negative gearing rules for residential property.
Broadly, future negative gearing benefits will be limited for residential property investments that do not add to housing supply.
The Government has stated that negative gearing will continue to be available for new builds, while existing residential investment properties are expected to be protected under grandfathering rules.
This means the timing of purchase, the type of property, and whether the property is a new build will become very important.
Property investors should carefully review the tax consequences before entering into any new residential property investment.
5. Small business CGT active asset concession threshold
An important amendment included in the final legislation increases access to small business CGT concessions.
The eligible turnover threshold for the 50% active asset CGT concession has been increased from $2 million to $10 million.
This is a major change for small business owners.
For many business clients, this may improve access to CGT concessions when selling active business assets, business premises or shares in business entities.
However, small business CGT concessions remain technical. Eligibility depends on the structure, turnover, asset use, ownership period, connected entities, affiliates and other conditions.
Business owners considering a sale should obtain advice before signing contracts or restructuring assets.
6. SMSF limited recourse borrowing arrangements
The legislation also includes amendments affecting limited recourse borrowing arrangements, commonly known as LRBAs.
This is particularly relevant for SMSFs considering residential property investment using borrowed funds.
The Government has stated that future SMSF borrowing arrangements for residential property will be restricted, while existing arrangements and certain midstream transactions may receive transitional treatment.
This means SMSF trustees should not assume that residential property borrowing strategies will continue to be available in the same way.
For clients already progressing an SMSF property purchase, the exact timing and transaction status will be critical.
Why Royal Assent still matters
Although the legislation has passed Parliament, a Bill does not become an Act until it receives Royal Assent.
Royal Assent is the final step in the legislative process. Once it occurs, the legislation becomes law.
For practical purposes, these measures should now be treated as passed legislation awaiting commencement, not as uncertain proposals.
What should clients do now?
These changes may affect tax planning decisions from now through to 1 July 2027 and beyond.
Clients should review:
* planned property purchases;
* investment property structures;
* asset sale timing;
* business sale planning;
* CGT exposure;
* trust distribution planning;
* employee deduction claims;
* SMSF property borrowing arrangements; and
* small business CGT concession eligibility.
The key point is that these measures have moved from proposal stage to passed legislation. Tax planning should now be reviewed accordingly.
Final comment
The first major tax reform package has now passed both Houses of Parliament.
Once Royal Assent is given, the legislation will become law.
At R G Partners & Associates Pty Ltd, we will continue to review the final Acts, commencement dates and ATO guidance as they become available.
Clients who may be affected should seek advice before making investment, property, business sale or SMSF decisions.
Disclaimer: This article contains general information only and does not constitute tax advice, legal advice, financial product advice, investment advice, borrowing advice or property advice. You should obtain advice specific to your circumstances before acting on any information in this article.
