I move that this Bill be now read a second time.
Today we are proud to introduce the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026.
Speaker, this is a Bill for workers, first home buyers and future generations.
It is the first step in the most ambitious tax reform package for a quarter of a century.
It will help ensure aspiration and opportunity are the birthright of every Australian, not just some.
This Bill delivers on 3 objectives.
It cuts taxes for every Australian worker - again, and again.
It makes it easier for people to buy their first home.
And it better aligns the tax treatment of labour income and asset income.
The Bill has 4 core elements:
- A new $250 Working Australians Tax Offset for over 13 million Australians
- A $1,000 instant tax deduction for workers
- Reforming future negative gearing to apply to new builds from 1 July 2027
- And returning the capital gains tax to its original intent by reintroducing cost base indexation so that only real gains are taxed.
Speaker, this Bill delivers even more tax relief for workers.
The Working Australians Tax Offset will provide a permanent tax offset of up to $250 every year for over 13 million Australians, from the 2027-28 financial year.
This is responsible tax relief, targeted to working people.
It means more money in the pockets of our nurses and teachers, tradies and truckies and other Australians who earn salaries and wages.
It represents the most meaningful, permanent increase to the effective tax‑free threshold since Labor last increased it more than a decade ago.
The Bill also delivers on our commitment to introduce a $1,000 instant tax deduction from the 2026-27 year.
Not only will this make tax time simpler for millions of workers, it will put cash back into their pockets as well.
Around 6.2 million people will benefit, with the average worker receiving an extra $205 at tax time.
More than a quarter of those who will benefit are under 30, and more than half are women.
People claiming more than $1,000 in work‑related deductions still can, and anyone claiming other non‑work‑related deductions will be able to do so on top of the instant deduction.
This includes charitable donations, superannuation contributions, union and professional association membership fees, and income protection, sickness and accident insurance premiums.
The Working Australians Tax Offset is set out in Schedule 3 to the Bill, and the $1,000 instant tax deduction is set out in Schedule 4.
This is more relief from a government which cuts income taxes whenever it responsibly can.
We are now cutting income tax 5 times, in 3 different ways.
We have already delivered tax cuts to every single Australian taxpayer, by bringing rates down and pushing thresholds up.
Another tax cut will commence on 1 July in just over a month's time, and again on 1 July next year.
Together with the new tax relief in this Bill, the average Australian worker will receive a combined benefit of up to $2,816 in 2028.
Our tax cuts have been opposed before and should not be opposed again.
Speaker, we are cutting taxes for workers and making it easier to buy a first home.
For too long, too many Australians have been locked out of the housing market.
We have an ambitious housing agenda and supply is still our primary focus.
But it has become increasingly clear that it cannot be our only focus.
After more than 2 decades of a distorted tax system, property prices have far outstripped wage growth.
Following policy mistakes made a quarter of a century ago, home ownership has been pushed further and further out of reach, especially for young Australians.
We hear a lot about helping people get on the property ladder, but there's no point having a ladder if the first few rungs are missing.
For too long, governments have turned a blind eye to a broken status quo.
A status quo that is unfair for people and unproductive for our economy.
We are not just acknowledging this, we are acting to fix it.
This Bill limits negative gearing on properties purchased after Budget night to new builds and returns the capital gains tax to its original intent.
Our reforms will mean 75,000 more homeowners entering the housing market over the next decade, reversing a decade of decline in home ownership rates.
Schedule 1 to the Bill amends the Income Tax Assessment Act 1997 and related legislation to replace the 50 per cent CGT discount for individuals, trusts and partnerships with cost base indexation and a 30 per cent minimum tax rate on capital gains accruing from 1 July 2027.
Under the changes, investors will index the cost base of their assets in line with inflation, so they only pay tax on their above‑inflation profit.
The changes will apply prospectively, with the 50 per cent CGT discount applying to gains accruing up until 1 July 2027, while indexation will apply to gains accruing thereafter.
Not everyone will pay more tax under these changes, some will pay less. It will depend on a range of factors, like rates of return, inflation and the holding period.
Someone who invested in the Australian share market and received the average return would have done the about same or possibly better under indexation over the past 10 or 20 years.
This is all about removing the distortions in the system that have warped our housing market and coincided with decades of low productivity growth.
Returning to indexation across all asset classes ensures investments are treated in a neutral way, and we don't create a new distortion.
Encouraging investment to follow economic returns, not tax advantages, will support productivity over time.
In addition to indexation, a minimum tax rate of 30 per cent will apply to real capital gains accruing from 1 July 2027.
The minimum tax reduces the incentive to defer realising capital gains until marginal tax rates are low, and better aligns the tax rate on gains with the tax rates paid by most workers.
Recipients of certain government payments, such as the Age Pension and JobSeeker, will be exempted from the minimum tax.
These changes will apply to all CGT assets, including pre‑1985 CGT assets, held by individuals, partnerships and trusts for at least 12 months.
In line with our goal of supporting new housing supply, investors who buy new builds will be able to choose either the 50 per cent CGT discount or indexation and the minimum tax when they sell the property.
The existing CGT discount of up to 60 per cent applying to qualifying affordable housing will be fully retained to preserve incentives to invest in those assets.
And importantly, the 4 existing small business CGT concessions will remain in place, allowing eligible small businesses to reduce or completely remove tax on any gains when they sell.
Schedule 2 to the Bill amends the Income Tax Assessment Act 1997 to limit negative gearing for residential property investments to new builds and key government housing priorities.
From the 2027-28 income year, losses related to existing residential investment properties purchased after 7:30pm AEST, 12 May 2026 will only be deductible against other income from residential properties, including capital gains.
Excess losses can be carried forward to offset residential property income in future years, so investors can continue to claim a deduction in the future for costs such as maintenance.
These changes will only apply to residential property held by individuals, partnerships, companies and most trusts.
Commercial property and other asset classes, such as shares, will remain subject to existing arrangements.
Widely held trusts and superannuation funds (including SMSFs) will be excluded.
Investors can continue to use negative gearing on new builds, ensuring the benefits of negative gearing are directed to investments that support growth in Australia's housing stock.
Negative gearing will continue to support those residential properties which genuinely add to supply, such as dwellings constructed on vacant land, or where existing properties are demolished and replaced with a greater number of dwellings.
Properties held at announcement will be allowed to be negatively geared in future years until sold. This ensures that taxpayers who made investment decisions under the existing rules will not be affected by the changes.
Investors that support government housing priorities will be exempt from the changes. This will include build‑to‑rent developments and dwellings provided as social or affordable housing.
Speaker, we are presenting these elements in one Bill not just because they are related, but because one part helps fund the other.
This is the first tranche of legislation to implement the very significant tax reform package announced in the Budget. There will be further legislation on specific implementation details and other parts of our tax reform package.
Legislating significant reforms in tranches is a standard approach, consistent with how other governments have undertaken tax reform, and it is appropriate to ensure the core policy features that apply broadly to most taxpayers are in place first.
This provides certainty to taxpayers and the market, while enabling further consideration and consultation on subsequent tranches of legislation dealing with more complex or specific policy issues.
As outlined in the Budget, the government is consulting with stakeholders on the treatment of capital gains of small and start‑up businesses where indexation is applied to a low or zero cost base.
Further consideration will also be given to a range of specific details such as interactions with attribution managed investment trusts (AMITs), tax consolidation, residency changes, along with any other relevant issues.
Where appropriate, these details will be finalised in subsequent legislation following consultation.
Speaker, we know that these changes are contentious.
We have seen dishonest scare campaigns and deliberate distortions of the truth.
But the facts matter and I want them to be clear.
Firstly, we are not introducing a tax on inheritances or inherited assets.
Secondly, people will still have their capital gains tax reduced under the new system, with the reduction now accurately reflecting inflation.
Thirdly, the vast majority of small businesses in this country will remain eligible for generous CGT concessions.
This means the overwhelming majority of small businesses can pay reduced or no capital gains tax when they sell.
These are the facts.
It's also a fact that this Bill presents a choice.
A choice between cutting income taxes for Australian workers, or keeping them higher.
Standing with first home buyers, or locking more Australians out of the market.
Taking intergenerational responsibilities seriously, or defending a broken system that fails future generations.
Speaker, we are proud to stand with workers and first home buyers.
We are proud to make the tax system fairer for the next generation.
This is about making a difference, not just marking time.
It's about taking the hard road of reform not the path of least resistance.
It's about making the right decisions, even when they are politically contentious.
It's about making difficult decisions, and dealing with issues neglected for too long, even when it would be easier to do nothing at all.
Most of all, Speaker, it's all about cutting taxes for workers, making it easier to buy a first home, and better aligning the tax treatment of labour and asset income.
That's why I commend the Bill to the House.
