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

Ms CHANEY (Curtin) (20:34): I rise to speak on the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026. These two bills do four things. They reform capital gains tax, replacing the 50 per cent CGT discount with cost base indexation and introducing a 30 per cent minimum tax, which will apply from 1 July 2027.

They limit negative gearing for residential property to new builds from July 2027, grandfathering existing investments. They introduce the working Australian tax offset, which will provide all working Australians with $250 a year from 1 July 2027, and they provide a $1,000 standard deduction for work related expenses for all wage earners. I support 3½ out of these four measures.

I've called for reforms to tax concessions granted to property investors since I was elected in 2022. I've called for income tax cuts, but I do not support the proposed CGT reforms beyond property. I want to support this bill, but I cannot in its current form.

It's vital that we get these bills right. If this reform is rushed or legislated with known design flaws, it will make the next round of reform harder. It will hand ammunition to those who want to wind it back.

Reforms that aren't properly debated and don't carry public legitimacy tend not to survive. There's a lot of good in this package. I support limiting negative gearing changes to new builds to incentivise housing supply.

This addresses a structural distortion that economists and housing researchers have consistently identified. For too long, these settings have tilted the playing field in favour of investors and against first home buyers, subsidising those who already own property at the expense of those trying to get their foot in the door. This reform corrects that.

It's prospective and it grandfathers existing investments. Some might say the grandfathering is too generous, but, given that more than half of investment properties are only negatively geared for four to five years, it will taper off. I support the CGT changes as they apply to housing.

That is the decision to retain the 50 per cent CGT discount for investment in new residential builds, while replacing the discount with an indexed model so only real gains are taxed for existing residential property. This is the right companion measure to the negative gearing changes. Together they address the same underlying distortion—tax settings that have channelled investment into existing housing at the expense of new supply and first home buyers.

The CGT discount, in the context of residential property, has not been building broad prosperity; it's been concentrating advantage among high-income investors at the expense of those trying to buy their first home. More than 80 per cent of the benefit of the current CGT discount goes to the top 10 per cent of income earners, and it's right to correct that specific distortion.

I think that there's community support for reforming negative gearing and CGT for property. There's a broad consensus that we need to move away from being a country where housing is an investment to accumulate wealth and towards a country where housing is available and affordable for everyone. In two community consultations over the last two years, I've found that those in my community of Curtin who've participated are strongly supportive of reforming these tax concessions for housing, despite being amongst some of the greatest beneficiaries of the current system.

This is why I've fought for reform to the tax concessions for housing investors and why I'm so pleased to see this reflected in the budget and in these bills. I support the working Australian tax offset. To be clear, at $250 a year, it doesn't come close to addressing bracket creep—the steady, invisible process by which inflation pushes wage earners into higher marginal tax rates year after year—but it moves in the right direction, towards reducing income taxes, and workers will welcome it.

It should go further, but it's directionally correct. I support the $1,000 standard deduction for work related expenses. It reduces the compliance burden for millions of Australians, frees up ATO audit resources and is the kind of sensible simplification that should have happened years ago.

But I cannot support these bills in their current form, because the government has chosen to extend the CGT reforms beyond housing to all other assets like businesses and shares. Changes to the CGT regime for housing have been socialised. I and others have been talking about this for years, and most of the concerned feedback I've had from constituents since the budget has not been about housing; the case has been made.

But the case has not been made for changes to CGT for other asset classes. The government argues that this is needed to create an even taxation landscape. I understand and support this aim in principle.

Ideally, investment decisions are made because of economic factors, not tax regimes. There is always a risk that we replace one tax distortion with another. But the tax landscape already has a range of distortions, including for new properties and small businesses, and most are there for a reason.

I support the changes announced in the budget to support small businesses—the loss carry back and loss refundability and instant asset write-off—which will help small businesses with cash flow in the early years, and I back the industry proposal to increase the turnover threshold for small businesses. But I share the concern of my constituent Angus. He told me: my concern is the breadth of the application.

Extending CGT changes to shares, private businesses and other productive assets risks penalising exactly the behaviour we should be encouraging: Australians taking genuine economic risk to build something. At a time when productivity is a huge concern, we must drive more investment in productive, high-growth assets—ambitious businesses and startups—and risk-taking that can deliver returns for the economy.

With the proposed indexing model for CGT, lower growth assets will be relatively more attractive than higher growth assets. That will not incentivise behaviours that contribute to getting us out of our productivity rut. Is this a distortion?

Well, maybe it is, but it could also be called a lever to encourage the type of investment we need to protect our future prosperity. If we were seeing significant cuts to personal income tax, there would be more of a case for extending this CGT reform to other asset classes. We do need to shift more tax burden from workers to wealth over the long term.

Passive wealth should not be taxed more favourably than the income of working Australians. But the WATO is hardly a meaningful reduction in the personal tax burden. The government has hinted at future tax cuts, but a future promise is not reasonable justification to pass flawed legislation today.

The best way to shift some of the tax burden from active to passive income would be through the proper indexation of tax brackets, something I've argued for since I was elected in 2022. It's not coherent to index capital gains while simultaneously allowing bracket creep to push wage earners into higher marginal rates year after year through the same inflationary mechanism.

Both problems have the same cause. A comprehensive approach to tax reform would address both. I've raised this with the Treasurer, but this principle has not been addressed in these bills.

I move: That all words after "House" be omitted with a view to substituting the following words: "does not decline to give the bill a second reading but: (1) notes that: (a) while there is community support for reforming the capital gains tax (CGT) discount for property, the Government has not made a strong case as to why the reforms should extend beyond property to other assets; (b) the proposed CGT reforms beyond property will discourage investment in the most productive and high-growth assets, like successful start-ups, businesses and shares; and (c) while the Government's aim to build an even tax landscape is sensible, it must not come at the cost of a productive and dynamic economy, nor our ecosystem of start-ups and small businesses; and (2) calls on the government to restrict the CGT reforms to property, or, at minimum, ensure there is a comprehensive public consultation and inquiry process to assess the impacts of the broader CGT reforms on our economy, productivity and business community".

This amendment limits the indexing approach to the CGT discount to housing so the current CGT discount settings remain in relation to other investment classes. With this amendment, I believe the government will have a mandate to make a difficult long-term change that's needed to level the playing field on housing without a broad range of unintended consequences, particularly for productivity.

Yes, there may be some complexities. I can see that residential properties might be purchased through a company structure to circumvent the CGT changes for housing. There will always be loopholes that need to be addressed, but it would be better to deal with those loopholes head on than to create a huge raft of new problems.

If the government is not yet in a position to agree to this amendment, then the least it could do is to slow the process down to understand the implications of these broad CGT changes. There's been very little consideration of reforming CGT beyond property, either in the community or amongst economists and civil society. The media have reported that the decision to extend the CGT reforms beyond property was made on the basis of Treasury advice less than one month before the budget.

There's a short Senate inquiry, but legislation of this significance warrants a far more public and rigorous process. Twenty-five days from referral to report will not be enough time to receive meaningful public submissions, conduct expert hearings, examine the interaction effects with superannuation and business investment or probe the unanswered design questions that the government itself has acknowledged remain open.

Compare this to the 1999 CGT reforms, which were reforms of comparable significance. That process involved an independent review body, in the Ralph review; two public discussion papers; more than 300 public submissions; seminars in every state capital; 31 focus groups; draft legislation released for consultation; and then a Senate committee inquiry on top of all that.

From establishment to legislation, the process ran approximately 12 to 14 months, not 25 days. Good process is not procedural tidiness. It's how you build the public legitimacy that makes reform durable.

It's how you surface unintended consequences before they're locked into law. It's how the government gets the opportunity to justify the choices it's making. This reform needs that justification.

The government seems to think that crashing through is the best approach—that consultation will just give the haters time to build their campaigns—but this is the hard work of developing policy: actually listening and recognising that you might not always have the right answers upfront and that legislation can always be improved. We used to have a process of green papers and white papers, where governments opened up discussion by publicly identifying an issue, signalled their approach, published exposure drafts, listened to feedback, made improvements and then passed legislation.

Now it seems to be legislation by stealth. It takes confidence to genuinely seek feedback, and there are lots of unanswered questions. What will these changes mean for ordinary Australians building wealth through the share market?

The only analysis that exists has come from industry bodies with an obvious interest in the outcome. Does the 30 per cent minimum tax, combined with indexation, produce fair outcomes across different asset classes and different investor profiles? Should capital losses be indexed to inflation?

These are questions that need to be answered, and a 25-day inquiry will not be sufficient. There are particularly difficult questions about the impact of these reforms on startups and high-growth assets. The government has acknowledged that there's a problem here but is asking the House to wave through this legislation and trust it to sort it out later.

Unfortunately, that trust has not been earned. The proposed CGT reforms will have the most immediate and material impact on startups. These businesses will be taxed on almost all their gains because the inflationary proportion of their gain is calculated on a very low base.

Australia cannot afford to discourage the investment that drives innovation and jobs. Early-stage high-growth businesses must not become collateral damage in a reform aimed at a very different problem. I've pressed the government on this since budget night, writing to the Treasurer and raising it directly in this House at the first opportunity and on several occasions.

The Treasurer and Assistant Treasurer are consulting on a carve-out for early-stage businesses, and I welcome that, but commitments are not legislation. The bills before us today contain no carve-outs for founders, investors or early employees with near-zero cost bases. They contain no mechanism for spreading gains over multiple years.

The government is consulting, but there is no answer yet, and the 25-day Senate inquiry will close before that consultation is complete. Asking parliament to pass these bills now on the promise that the hard design questions will be resolved later is asking us to legislate to create a known problem and fix it afterwards. On a question with this much consequence for Australia's innovation economy and our productivity challenge, that's not good enough.

The government should not bring a bill to the House that it knows requires immediate amendment. I came to this parliament calling for exactly the kind of housing tax reform contained in this package. I welcome it.

I support the negative gearing changes. I support the WATO as a first step towards reducing the tax burden on working Australians. I support the standard deduction, but I cannot support the extension of CGT changes beyond housing at this point.

If the government wants to undertake tax reform that will last, it must build the case for it through a proper consultation process. It recognises that carve-outs are needed for startups. Eligibility will be complicated.

The case has been made for CGT reform on housing, but beyond that the case has not been made. The easiest carve-out at this stage would be for all non-housing assets, and the best way to build the public's trust that this is part of a plan to ensure our tax system is fit for purpose in the longer term would be to include meaningful personal income tax cuts in this package, not $250 per person with ministerial discretion.

We need to take the time and get it right, otherwise future tax reform will only be harder. The DEPUTY SPEAKER ( Ms Claydon ): Is the amendment seconded? Ms Spender: I second the amendment and reserve my right to speak.