Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026

Ms PAYNE (Canberra) (17:37): I'm proud to rise in support of this landmark legislation that delivers the most significant overhaul of Australia's tax system in a quarter of a century—and a much-needed one. For my community of Canberra, the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 is genuinely transformative, particularly for first home buyers. It's making our tax system work for the Australian public.

This legislation implements four key pillars of the government's tax reform package announced in the budget: a new working Australians tax offset, providing 13 million working Australians with tax cuts; a $1,000 instant tax deduction for work related expenses; fundamental reforms to capital gains tax; and reforms to limit negative gearing to new builds. Together, these measures will build a better, fairer, simpler tax system, reducing the tax burden for working people, helping more Australians into homeownership, delivering $3.5 billion in new measures to support businesses, including startups, and cutting compliance costs by $540 million each year.

Treasury modelling released this week shows that the cumulative impact of these reforms would benefit around 90 per cent of young Australians and that, had these settings been in place since the year 2000, 90 per cent of Australians would have been better off by the time they turned 30. Canberra is home to tens of thousands of working Australians: APS employees; nurses and midwives at the Canberra Hospital; teachers at our schools, tradies building our city; retail and hospitality workers; and the many small-business owners who are the backbone of our city.

Every one of those workers deserves to keep more of what they earn. Schedule 3 of this bill introduces the $250 working Australians tax offset, a permanent structural tax cut for 13.3 million Australians who receive income from work, commencing from 1 July 2027. That includes approximately 6.3 million women.

This is a lasting improvement to the architecture of our tax system. It will increase the effective tax-free threshold for working Australians by $1,785 to $19,885, or $24,985 for those also eligible for the low-income tax offset. When combined with our three previous rounds of tax cuts and the instant tax deduction, the average Australian worker will be almost $3,000 better off in 2028.

Crucially, this measure is deliberately designed to support younger Australians. Millennials and gen Z are expected to make up around two-thirds of those who benefit. For many Canberrans who are early in their careers, renting in our city, paying off their HECS debt and trying to save a deposit, this is real and meaningful relief.

This measure recognises the fundamental truth that, for most Australians, income comes from work. Our tax system should reflect and reward that. Schedule 4 delivers on one of our key 2025 election commitments: a $1,000 instant tax deduction for work related expenses from the 2026-27 income year.

Canberra workers spend money to do their jobs—on uniforms, tools, home office equipment, professional development and more. Every year, millions of Australians spend hours gathering receipts and filling in ATO forms to claim those costs back. That is time they could spend with their families or doing anything other than tax administration.

The $1,000 instant deduction changes that. For 6.2 million workers in 2026-27, with an average tax saving of $205, this measure puts money back in pockets and takes the headache out of tax time. The ATO estimates it will save individuals $380 million in compliance costs every year.

Importantly, workers with more than $1,000 in expenses can still claim the full amount. Charitable donations, union fees and professional association memberships remain fully claimable on top. This is a floor rather than a ceiling, and it makes the system simpler for everyone.

Of all the challenges facing young Canberrans, none are more acute than housing affordability. Canberra consistently ranks among the least affordable cities in Australia for first home buyers. The median house price has placed ownership out of reach for a generation of people who grew up here and want to build their lives here.

The causes are many and complex, but our tax settings have been a significant part of the problem for too long. In 1999, the Howard government replaced capital gains tax indexation with a flat 50 per cent discount. The reporting of the Senate Select Committee on the Operation of the Capital Gains Discount this year found that this concession, in combination with negative gearing, has skewed housing ownership away from owner-occupiers towards investors.

It has distorted investment decisions and encouraged speculative leverage into established properties, driving up prices at the expense of aspiring homeowners. The evidence is damning: house prices have risen far faster than wages. The proportion of young Australians who own a home has collapsed.

Canberrans who rent because they cannot afford to buy are doing so in a market shaped in part by tax settings that reward property investors over working families. Schedules 1 and 2 of this bill fix that, not by punishing investors but by redirecting the incentive structure towards new supply and away from established property speculation. Schedule 2 limits negative gearing on residential property to new builds from 1 July 2027—the properties purchased after budget night.

This is a sensible, targeted reform. If you already own an investment property or have already entered a contract, nothing changes. The government is fully grandfathering the existing arrangement for those who already made decisions based on current rules.

There is no retrospective impact. For new investment, the message is clear. We want to incentivise building new homes, not bidding up the price of existing ones.

Negative gearing will remain available for new builds. Commercial property and other asset classes like shares are unaffected. The modelling shows this reform, combined with the CGT changes, will support 75,000 more Australians into homeownership over the next decade.

For Canberra, where the housing market has been particularly tight, this is a meaningful shift. More supply and less investor competition for established dwellings mean more opportunity for first home buyers in suburbs like Curtin, Narrabundah and Watson. Schedule 1 replaces the 50 per cent CGT discount with cost base indexation for gains accrued from 1 July 2027, accompanied by a 30 per cent minimum tax on net capital gains.

This reform returns the CGT system to what it was originally designed to do: tax real gains not inflationary gains. Under the new arrangement, investors will index the cost base of their assets in line with inflation. They will only pay tax on what they have genuinely earned above the rate of inflation.

That is fairer. The 30 per cent minimum tax ensures that investors cannot simply defer capital gains to years when their income is low to minimise their effective tax rate. It ensures gains are taxed at a rate commensurate with what most workers face throughout their working lives.

Importantly, no gains accrued before 1 July next year are affected. The 50 per cent discount will apply to all gains up to that date, using the asset's value at 1 July 2027 as the new cost base. There is no retrospective tax.

These are changes to how future gains are treated. Property investors who buy new builds will have the option to choose either the 50 per cent CGT discount or the new indexation and minimum tax arrangements when they sell, ensuring the reform continues to incentivise investment in new housing supply. Recipients of certain government payments, including the aged pension and JobSeeker, will be exempt from the minimum tax, protecting those on fixed or low incomes.

The four existing small business CGT concessions are preserved in full. The vast majority of small businesses are eligible for these concessions, meaning they can pay reduced or no capital gains tax on the sale of their business. The government has also committed to further consultation on how the new arrangements apply to startups and small businesses with low cost bases, which is a recognition that these sectors need tailored treatment.

For Canberra's substantial population of public servants and professionals who hold shares or investment properties as part of their long-term savings, it is worth noting modelling shows that, for someone who invested in the Australian share market over the past 10 or 20 years and received average returns, they would have done the same or better under the indexation system than under the 50 per cent discount.

This bill puts in place the core provisions that apply to the broadest range of taxpayers, providing certainty to individuals and market participants while the government continues consultation on more complex and specific issues. The new revenue raised will be returned to workers and businesses in the near term and, together with expenditure savings, will improve budget sustainability over the medium term.

This is responsible reform. It's a rebalancing of a system that has, over decades, drifted away from its original purpose. The coalition has chosen over the past few weeks to side with the status quo, with a tax system that has contributed to housing unaffordability for generations of Australians.

It is a choice to protect the 1999 distortion rather than to fix it. It's a decision to keep more young Australians out of the housing market. It's a decision to back those with the most against the interests of those with the least.

It's disappointing but not unsurprising. The Albanese Labor government is choosing differently. We are choosing to back working Australians over the tax advantages of the already wealthy.

We are choosing to help young Australians into homeownership rather than entrench investor advantage. We are choosing to reform. For the people of Canberra—the young professionals sharing a house in Ainslie who can't save fast enough to keep up with rising prices, the nurse doing a double shift at North Canberra Hospital, the teacher spending their own money on classroom supplies or the small business owner who has worked their whole life to build something worth selling—this bill is about a tax system that finally works for them.

It builds on everything this government has done—the stage 3 tax cuts, the cost-of-living relief and the housing investments. It is the next step in making our economy work in the interests of more Australians and in taking our intergenerational responsibilities seriously, rather than leaving these problems for the next generation to solve.