Treasury Laws Amendment (Tax Reform No. 2) Bill 2026
Senator DARMANIN (Victoria—Deputy Government Whip in the Senate) (09:17): The Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 represents the next stage of the government's ambitious tax reform agenda. Rather than rewrite history, as Senator Cash has just said we were doing, I would like to take the opportunity in this debate to focus on some of the other important schedules that this bill covers that were neglected in the contribution that we just heard from Senator Cash, which was laden with hyperbole which focused solely on schedule 4.
As part of the government's 2026-27 budget tax reform package, this bill does contain three other measures designed to support investment, strengthen business and resilience, and advance important national priorities. The bill includes schedule 1, which introduces a two-year loss carry-back tax offset; schedule 2, which makes the $20,000 instant asset write-off permanent for eligible small businesses; schedule 3, which provides an income tax exemption for players and staff associated with the PNG Chiefs; and, as you just heard some discussion about, schedule 4, which ensures that certain properties that are owned on budget night will retain access to negative gearing in some circumstances.
Taken together, these measures help deliver a better tax system for business, encourage investment and innovation, and support a simpler and more sustainable tax system. These reforms, as we know, sit within a broader agenda focused on helping more people buy their own home, cutting income taxes for workers again and better aligning the tax treatment of labour and asset income.
These reforms are part of a broader effort of our government to reshape Australia's tax system for the future. We want a tax system that makes it easier for Australians to get ahead, not one that locks younger generations out of homeownership or discourages productive investment. That means that we need to create a fairer balance between the taxation of labour and assets, reducing unnecessary complexity and ensuring that the system supports growth, productivity and opportunity.
This bill takes another important step in that direction. The first schedule introduces a two-year loss carry-back tax offset. This measure is about helping businesses manage uncertainty, navigate difficult periods and recover more quickly from setbacks, and it is a practical reform that responds to the real-world needs of Australian businesses.
Businesses do not always operate in straight lines, as we know. Industries experience disruption. Companies invest and take risks and sometimes face periods where losses arise before growth and profitability return.
The loss carry-back measure recognises that reality. At its core it's about improving cash flow and helping businesses remain resilient through periods of adjustment or broader economic shocks. By allowing eligible companies to carry losses back against previous taxable profits, businesses can access support when they need it most.
Importantly, this measure is expected to benefit more than 85,000 companies annually. It encourages businesses to be able to take those sensible risks while providing a practical mechanism to help businesses remain viable during challenging periods. Businesses that can weather difficult conditions are more likely to keep investing, retain workers and continue contributing to their local communities.
And there is strong support for this reform. Business groups, including the Australian Chamber of Commerce and Industry, the Business Council of Australia and the Housing Industry Association have recognised the role it can play in improving cash flow, strengthening resilience and supporting business investment. The second schedule makes the $20,000 instant asset write-off permanent.
This is a really significant reform. Up to 4.1 million businesses with aggregated turnover of less than $10 million per annum will be able to immediately deduct eligible assets costing less than $20,000 from 1 July 2026. This bill provides a permanent framework that gives businesses confidence when making investment decisions.
The $20,000 threshold will continue to apply on a per asset basis, meaning eligible businesses can instantly write off multiple assets. For assets costing $20,000 or more, businesses will still be able to access the small-business simplified depreciation pool, depreciating those assets at 15 per cent in the first income year and 30 per cent in each income year after that.
The bill also continues the suspension of the lockout rules until 30 June 2027. These rules currently prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out. Their ongoing suspension ensures businesses can continue to access the arrangements that best meets their needs.
We are making it less complex for small businesses to do what they do best and just get on with it. The instant asset write-off forms part of the government's broader commitment to reduce red tape and compliance costs by $10.2 billion annually. It is estimated to reduce ongoing compliance costs for small businesses by around $32 million every single year.
At the moment, the instant asset write-off threshold is just $1,000. This government increased that threshold to $20,000, and we are making it permanent. That means greater certainty, less paperwork and stronger incentives for businesses to invest in productive assets.
Again, stakeholders have strongly backed this reform. The Business Council of Australia stated: Making the instant asset write-off permanent and delivering loss carry back are useful steps for small- and medium-sized businesses and will help businesses invest, grow and create jobs. CPA Australia described the measure as: … a critical step toward giving small businesses the certainty that they have long been calling for.
PwC similarly welcomed the reform, observing 'the instant asset write-off is no longer a moving target' and that small businesses 'now have a more stable basis on which to plan investment in productive assets'. The Housing Industry Association also highlighted the benefits for builders and trades, noting that these measures will improve certainty and financial resilience across the sector.
When business groups, tax professionals and industry representatives all point to the benefits of greater certainty, reduced compliance and stronger incentives to invest, it is clear that this is a reform that is worth supporting. Now I want to turn to the third schedule. Schedule 3 provides an income tax exemption for players and staff associated with the PNG Chiefs.
This measure forms part of a much broader partnership between Australia and Papua New Guinea and reflects the important role that sport can play in bringing people together. The Albanese Labor government has committed $250 million over 10 years to the Pacific Rugby League Partnership. This forms part of a broader $600 million investment that includes support for a Papua New Guinea team, now known as the PNG Chiefs, to enter the NRL competition by 2028.
It also includes investments designed to strengthen rugby league participation across Papua New Guinea, Fiji, Samoa and Tonga. This partnership is so much more than the game. It includes expanding youth engagement and violence prevention programs to reach more communities and establishing primary and high school competitions across Papua New Guinea, Tonga, Samoa and Fiji.
It includes programs to promote girls' participation in rugby league, and it includes building men's and women's national competitions across a range of age groups while continuing to support Pacific Championships matches and identifying opportunities for NRL and NRLW matches to be played throughout the region. All of this—the partnership and initiatives—helps build pathways in education, in leadership and in employment, strengthen communities and create great opportunities.
It also strengthens relationships between Australia and our Pacific neighbours. Sport, as we know, has a unique ability to connect people in a way that few other things can. While the direct beneficiaries of the tax exemption are the players and the staff of the PNG chiefs, the broader benefits extend far beyond the team.
This measure is one part of a wide partnership designed to strengthen regional relationships and support long-term community development. Papua New Guinea is making a substantial contribution to this partnership. To ensure that Australia does not inadvertently undermine that contribution through the operation of domestic tax law, this bill provides a targeted exemption for PNG Chiefs players and staff.
The exemption helps support the success of the team, which in turn contributes to the success of the broader partnership and grassroots development programs connected to it. The Prime Minister of Papua New Guinea, the honourable James Marape, has been a champion of this project. In a country with more than 800 different language groups and cultures, he has recognised the power of sport as a common language capable of bringing people together and building national pride around one team and one nation.
That vision and pride shines through this partnership. Let's go to schedule 4. The amendments in schedule 4, as I said earlier, ensure a property owned on budget night will retain access to negative gearing in certain circumstances.
They ensure that an individual can retain this treatment for an ownership interest in a property where the property was acquired from a spouse through an inheritance or relationship breakdown or where someone inherits part or all of a property in which they already had an ownership share. They also ensure new builds will retain access to negative gearing and concessional capital gains tax treatment in the same circumstances.
The government released drafts of these amendments for consultation on 4 August, reflecting our intention to consult on the more complex aspects of these reforms. Our intention had been to progress this legislation as a priority following the consultation process. Finally, I would like to acknowledge the work of the Senate Economics Legislation Committee in its examination of this bill.
As chair of the committee, I'd like to thank all of the individuals and organisations who contributed to the inquiry, whether through written submissions or by appearing before the committee to provide evidence. Their contributions assisted the committee in its consideration of these important reforms. The second tranche of the government's budget tax reform is a set of practical measures that will help businesses invest, grow and remain resilient.
But, as we know, it's part of something bigger. The governments' agenda recognises that our tax settings should work for people, support investment and productivity and help more Australians achieve the security that comes from owning a home. We are making it easier for Australians to buy a home.
We are delivering tax cuts for workers. We are creating a fairer balance between the taxation of Labor and assets. We are building a tax system that supports productive investment rather than complexity and loopholes.
I commend this bill to the Senate.