Chartered Accountants Australia and New Zealand (CA ANZ) has made a submission to the Senate Economics Legislation Committee inquiry into Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026 (the Bills).

CA ANZ supports tax reform that is clear, practical and easy to administer. However, as currently drafted, the Bills lacks legislative clarity and will impose substantial compliance costs on taxpayers and their advisers.

Key proposed changes

The Bills propose making significant changes to negative gearing and the capital gains tax (CGT) regime, as well as introducing a standard $1,000 work-related deduction from the 2026-27 income year and the $250 Working Australian Tax Offset from the 2027-28 income year. Key changes include:

• From 1 July 2027, the 50% CGT discount will be replaced with indexation of the cost base for almost every CGT asset. The 50% CGT discount will still apply to gains accrued before this date
• Investors in new residential properties can choose between the 50% CGT discount or indexation of the cost base
• A minimum 30% tax on net capital gains will apply from 1 July 2027
• From 1 July 2027, negative gearing will be limited to new residential builds acquired on or after 12 May 2026
• Losses from negative gearing on established real estate can only offset rental income or capital gains from residential properties, effectively quarantining these losses to income and gains from residential property. Excess losses may be carried forward.

CA ANZ’s key recommendations

Our submission makes the following key recommendations:

• Conduct a statutory review of the Bills within 12 months, given the short consultation period
• Include core principles in the legislation itself, rather than in explanatory material or future legislative determinations. This includes:
  • Defining “new residential dwelling”
  • Specifying the amount of the Working Australian Tax Offset
  • Outlining how to determine the market value of a CGT asset at 1 July 2027
  • Clarifying who is excluded from the 30% minimum tax on capital gains
• Retain the taxpayer’s choice or change the order in which capital losses are used to preserve the grandfathering of the 50% CGT discount
• Amend rules that prevent taxpayers from accessing indexation if they have been non-residents at any time during the ownership period of a CGT asset.

The Government has indicated a second tranche of legislation will address the impact of indexation on business. Ideally these changes would have been included in this legislative package. CA ANZ recommends that the Government allow companies to access indexation.

CA ANZ also recognises concerns from tech start-ups about the difficulty of indexing an asset that has a low-cost base. This issue affects other businesses as well. Increasing the thresholds for the small business CGT provisions that provide a 50% discount for active business assets and reconsidering income averaging could address this without industry-specific provisions.

CA ANZ looks forward to working constructively with the Government, Treasury and the ATO to ensure these reforms are practical and achieve their intended outcomes for taxpayers.