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

Dr RYAN (Kooyong) (19:22): The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026 form the first legislative tranche of what will likely be several to implement the government's 2026-27 budget tax reforms. This represents the most substantial attempt at tax reform in a generation. The package does four things.

First, it replaces the 50 per cent capital gains tax discount for individuals, trusts and partnerships with cost based indexation and a 30 per cent minimum tax on capital gains from 1 July 2027. Second, it limits negative gearing for residential property to new builds from the same date. Third, it introduces a working Australians tax offset of up to $250 a year for workers earning labour income.

Finally, it introduces a $1,000 standard deduction for work related expenses. I commend the government for using its electoral mandate to pursue ambitious change, but generational reform requires serious scrutiny, broad consultation and careful design. When Bob Hawke set out to reform the Australian tax system, he took that to an election and he undertook broad based community consultation.

The Hawke-Keating reforms—capital gains tax, fringe benefits tax and lower income tax—all endured because they were sense tested before they were locked in. John Howard spent over a year on reviews before introducing the CGT changes that this legislation will undo, and they lasted a quarter of a century. In contrast, Howard's Work Choices had no electoral mandate, it underwent only eight days of parliamentary debate, it killed his government and it was repealed within three years.

The government's Economic Reform Roundtable in August 2025 was a truncated version of consultation. The youngest attendee was 43 years old. The exclusion of younger Australians from a reform agenda explicitly framed around intergenerational equity was striking.

Though the reforms which emerged from that roundtable should have been taken to the 2025 federal election, they were not. For decades, Australia's tax system has been skewed towards those who already hold wealth. The 50 per cent capital gains tax discount turbocharged investment in established residential property.

It drove house prices from roughly four times the median income when it was introduced to more than eight times the median income today. Negative gearing has allowed property investors to deduct losses against wage income, pricing out first home buyers across the country. Homeownership among 25- to 35-year-olds has fallen sharply.

In 2022, it was reported that it took 11 years to save a 20 per cent deposit on an average wage. In 2023, investors aged over 60 accounted for 28 per cent of property investors, up from just 12 per cent in the year 2000. Economists have raised concerns about this market distortion for years, and it's been my position since I was elected in 2022 that we need to reform our tax system to address increasing intergenerational inequity and the housing crisis.

So I support the reforms to CGT and negative gearing around housing that the government is proposing in this legislation, but the government did not flag its intention to extend CGT changes beyond housing before this year's budget. The case for reforming negative gearing and the CGT discount was made and largely accepted in the context of housing affordability, but, when the government announced on budget night that these changes would extend to all asset classes, including shares, start-up equity, venture capital and early-stage business, that caught many by surprise, not because the principle of increasing taxation across all asset classes, to approximate that of Labor, is inherently wrong—because it's not—but because there had been no consultation, no forewarning and no proper policy development process around those broader changes.

ACOSS has reported that Kooyong, the electorate that I have the honour to represent, is the electorate in this country with the second-highest total benefit from CGT discounts. It's a community that's worked hard, that has invested carefully and that has a sophisticated understanding of our economy. Yet in March this year I conducted a community survey of 931 constituents in which 73 per cent of respondents supported changes to capital gains tax arrangements and 85 per cent supported changes to negative gearing.

After the budget, I conducted a second survey, which attracted 927 responses from every postcode in Kooyong. Most respondents, at 64 per cent, supported the government's changes to negative gearing. Support for capital gains tax reform was also clear, with 43 per cent supporting the proposed changes across all asset classes and a further 24 per cent supporting reform where it applied to property alone.

It's clear that many in Kooyong are prepared to support reforms that might not be in their immediate financial interest, because they understand and recognise the need to improve the fairness and the sustainability of Australia's tax system. But that support for reform does not translate to every aspect of this package, and the dominant sentiment from my community is that immediate tax reform should focus on property.

Business owners, professionals, retirees and individuals in complex or vulnerable circumstances don't want these changes to extend to investment assets, business structures and family arrangements. They're most concerned about the proposed 30 per cent minimum tax on capital gains, with 48 per cent of respondents in Kooyong opposing the measure and 38 per cent supporting it.

It makes sense to reduce incentives to defer capital gains realisations to low marginal tax rate years. It's fair to exempt income support recipients, but this measure disproportionately affects other groups with limited means. A young parent said to me, 'Non-property investment is one of the few remaining ways that a family can build towards a home deposit.' A renter told me, 'This feels like a blunt measure which will hurt the wrong people.' Young investors feel that they're being denied the opportunity to build their first foothold of wealth or to secure a home deposit.

Some sources suggest that more than one in three Australians aged under 35 invest, and they're more likely to take on risk by investing in cryptocurrency and exchange traded funds. For them, those investments are an easier pathway to health than to housing. I'm pleased that small businesses will remain eligible for substantial discounts on capital gains, despite the new minimum 30 per cent rate on real gains.

But I've heard from small businesses in Kooyong that thresholds for small-business CGT concessions have not kept pace with business growth and inflation. COSBOA is advocating that eligibility thresholds should increase. Debate interrupted.