The Australian Parliament has just passed what is being called the most significant structural overhaul of the nation’s tax system in nearly three decades.
The core of these reforms was legislated under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026, which officially passed both houses and received Royal Assent on June 26, 2026. Alongside these, major superannuation tax changes were also locked into law earlier in the year.
🏡 1. Property & Investment Tax Overhaul
The most heavily debated changes target how investment properties and assets are taxed, effectively reshaping wealth creation strategies moving forward.
Capital Gains Tax (CGT) Discount Abolished
- The Passed Law: From July 1, 2027, the flat 50% CGT discount for individuals, trusts, and partnerships holding assets for more than 12 months is completely replaced.
- The New Mechanism: It is being replaced with a cost base indexation model (where the original purchase price of your asset is adjusted up for inflation via the Consumer Price Index, meaning you are only taxed on “real” gains).
- The 30% Tax Floor: Alongside indexation, a minimum 30% tax rate floor will apply to real capital gains. Pensioners and income support recipients are exempt from this floor.
- Transitional Rules: For assets bought before July 1, 2027, the gain will be split: pre-July 2027 gains retain the old 50% discount rules, while post-July 2027 gains use the new indexation rules.
Negative Gearing Restricted to New Builds
- The Passed Law: From July 1, 2027, tax support for negative gearing is being sharply narrowed to encourage housing supply.
- The New Restriction: Rental losses from established residential properties purchased after 7:30pm AEST on May 12, 2026 can no longer be used to offset your salary or wage income. Instead, these losses are “quarantined” and can only be used to offset future rental income or capital gains from property sales.
- The Exemptions: Existing established properties held before the May 2026 cut-off are fully grandfathered. New residential builds are entirely exempt—investors who buy new builds can continue to negatively gear against their personal wage income and will even get to choose between the old 50% CGT discount or the new indexation system when they sell.
💼 2. Relief & Simplification for Workers
To balance out the investment crackdowns, Parliament passed major simplifications and offsets for regular salary earners.
The $1,000 “Instant” Tax Deduction
- The Passed Law: Starting July 1, 2026, a flat $1,000 standard deduction is introduced for work-related expenses.
- How it works: If you have minor work expenses, you can claim the flat $1,000 without needing to log or hold onto a single receipt. If your work-related deductions exceed $1,000, you must bypass the standard deduction and use the traditional, strict substantiation rules (keeping full receipts and logs).
The Working Australians Tax Offset (WATO)
- The Passed Law: Starting in the 2027–28 financial year, a new $250 non-refundable tax offset will be rolled out annually.
- Eligibility: This will automatically apply to more than 13 million Australian resident workers whose net labor income exceeds the tax-free threshold.
💰 3. Wealth & Superannuation Structural Changes
Two other major structural updates have cleared Parliament, focusing on superannuation and trust structures.
Division 296: The $3 Million Super Tax
- The Passed Law: Officially passed in March 2026 under the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026, this takes effect on July 1, 2026.
- The New Penalty: Individuals with a total superannuation balance (TSB) exceeding $3 million will face an additional 15% tax on the earnings corresponding to the portion of their balance above $3 million (bringing the total tax rate on those earnings to 30%). Crucially, this includes taxing unrealized capital gains.
Low Income Superannuation Tax Offset (LISTO) Boost
- The Passed Law: From July 1, 2027, the government is scaling up the LISTO framework to provide higher super co-contributions and tax offsets specifically to low-income earners to build super equity.
⏳ Timeline of Key Commencement Dates
| Rule Change | Status in Parliament | Effective Date |
| $1,000 Work Deduction | Passed (June 2026) | July 1, 2026 |
| Division 296 Super Tax ($3M+) | Passed (March 2026) | July 1, 2026 |
| Negative Gearing Cut-off | Passed (June 2026) | May 12, 2026 (Grandfathering date) July 1, 2027 (Quarantining starts) |
| CGT Discount Abolition | Passed (June 2026) | July 1, 2027 |
| Working Australians Tax Offset ($250) | Passed (June 2026) | July 1, 2027 |
⚠️ What’s Next? (The Discretionary Trust Rules): Note that the government’s proposal to hit discretionary trusts with a 30% minimum tax floor from July 1, 2028, was not packed into this round of legislated bills. It is slated for future legislative packages (such as the Tax Reform No. 2 Bill introduced late June), meaning trust restructures have a brief window before those rules are finalized.
