Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026
Mr SOON (Banks) (13:13): As the Treasurer said last week, this legislation, the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and the Income Tax Amendment (Tax Reform No. 1) Bill 2026, is part of the most ambitious tax reform package in a quarter of a century. It delivers on three key objectives: firstly, that we cut the taxes for every Australian worker even further; secondly, that we make it easier for people to buy their first home; and, thirdly, that it better aligns the tax treatment of income derived from labour and income derived from assets.
Changes like these are important in ensuring that we support the opportunity of homeownership for every single Australian but also make the reform we need to set Australia up for the future. I want to start by going through the bill in detail and clarifying some of the points that people in my electorate have asked me about since the budget. Schedule 1 of the bill legislates the changes to capital gains tax arrangements so that the system operates as it was originally intended and directs investment in the market to where it is most productive for our economy and our society.
Importantly, the proposed changes are prospective, not retrospective. Any capital gains earnt before 1 July next year will still attract the 50 per cent discount, with the CGT changes only applied on gains accrued after that date. Most importantly though, the legislation keeps in place the complete exemption for the family home as well as the existing four small-business concessions, which the vast majority of small businesses are eligible for, allowing them to pay reduced or no capital gains tax if and when they choose to sell.
Schedule 2 of the bill legislates changes to negative gearing arrangements, limiting it to new builds. Again, importantly, residential properties held before 12 May 2026, including those under contract but not yet settled, will still be allowed to be negatively geared in the future. This ensures that investors that made investment decisions that affect their future based on the existing rules will not be penalised.
The current tax settings have locked a generation out of homeownership, and these reforms will mean an additional 75,000 first home buyers entering the property market over the next decade and direct investment into new housing supply. Schedule 3 of the bill legislates the $250 working Australians tax offset, reducing the tax bill of every Australian who derives their income from work, benefiting 13.3 million taxpayers.
This is another tax cut delivered by this government. It is a permanent measure and a structural improvement to the tax system, which recognises that for most Australians, especially young people, their income is derived from work. Finally, schedule 4 of the bill legislates the government's $1,000 instant tax deduction, implementing Labor's 2025 election commitment.
The instant deduction will allow taxpayers with income from work to deduct $1,000 from their taxable income rather than claim individual expenses. The Tax Office estimates this change will save individuals $380 million in compliance costs each year, making tax time both simpler and cheaper, with the average worker receiving an additional $205 back in their pocket.
This government has already delivered tax cuts to every single taxpayer by bringing down rates and raising income thresholds. Another tax cut will commence in just 29 days and again on 1 July next year. As the Treasurer said last week when the bills were introduced, under this government, taxes have been cut five different times in three different ways.
When you combine the existing tax cuts delivered or legislated with those detailed in this bill, the average Australian worker will be paying up to $2,816 less in tax in the 2027-28 financial year, as compared to 2023-24. As many reviews and much analysis have shown, Australia is in need of tax reform. Australia has an ageing population.
That much has been clear for some time. In 2018, the Bureau of Statistics published a projection that the population aged over 85 would double to more than a million over the following 25 years. I'm noting, of course, that we are eight years into that timeframe now.
That same projection stated that, over the same time period, the number of people aged 65 and over would also nearly double to 6.7 million people by 2042. Finally, the ABS also noted that the percentage of people outside the traditional working age range of 15 to 64 would increase to 58 per cent, a growth of more than 10 per cent. When looking at our tax system and government spending, this is incredibly important context.
A growing proportion of our population have finished their working lives and are therefore no longer paying income tax, as they should and as they've earnt. Meanwhile, the demand for government services, in the form of aged care, aged pensions, Medicare and the PBS and other health services, will grow. The task of serious tax reform that rebalances the tax burden away from income earnt from wages and labour towards wealth and assets is one that any government was going to have to confront sooner or later or otherwise risk eroding the budget so significantly in the long term that services Australians rightly expect would not be delivered.
This government is working to deliver that rebalancing, making sure our economy is in the interest of more Australians, businesses and future generations, instead of leaving it to the next generation to fix in the name of political expediency. It does this while delivering targeted tax cuts and cost-of-living relief to 13.3 million hardworking Australian taxpayers.
Secondly, I want to reflect on the housing market and environment that first home buyers are currently having to operate in. In 1970, the median age of a first home buyer was around 25 years old. Today, it is around 35, and one in five first-home-buyer loans are now going to those aged over 40.
First home buyers today are working hard and having to save for longer than ever. This is a challenge that many young people currently view as futile. As much as they want to own their own home, they feel like they will always be playing catch up to a market that is stacked against them.
The status quo in our housing market is broken. The policy mistakes made by the coalition 25 years ago were intended to encourage activity but instead turned existing housing stock into a speculative commodity, the price of which has been consistently driven upwards. In the process, first home buyers have had to go up against investors who know the strength of their hand, because the concessional tax treatment will help them to outbid others.
The idea that government should go on ignoring the reality of this situation to preserve a status quo that is unproductive for our economy and unfair to the vast majority of Australians is what this government is confronting. Already, since the budget, the news that existing properties won't be eligible for negative gearing has had an impact. An auction for a unit in Mortdale in my great electorate of Banks is one example.
It was bought by a first home buyer at an auction in which every bidder would be an owner-occupier. This is being seen all across our country. In conclusion, this legislation confronts a generational change and a challenge.
It corrects some of the imbalances in our housing market while protecting people who have made major decisions under the existing rules. Most importantly, it fronts up to the challenge that our changing and ageing demography presents us. Since the budget, I have received feedback from members of the community in my electorate of Banks, and I've endeavoured to speak directly to as many of these constituents as possible.
Like any reforming policy, these changes have garnered considerable debate. This legislation is about recalibrating investment and supporting aspiration. It is saying that income from labour and income from assets should be taxed fairly, and it is saying to first home buyers and young Australians across our country, as well as renters, that their aspiration to own their own home is still worth having and that we will support you in that ambition.