Significant changes affecting how Australians reap benefits from their investments and pay taxes have been enacted by the federal parliament, following a crucial agreement with the Greens.
The reform package, which was initially introduced in the May budget, encompasses adjustments to capital gains tax, negative gearing, and income tax.
These measures have now been solidified into law, though a few modifications were made along the way. Here’s a comprehensive overview of the new legislation.
Loophole closed for self-managed super funds
Even though the changes were announced as part of the May budget, Labor, due to its minority status in the Senate, needed the support of nine crossbenchers to successfully pass the tax bill.
On Tuesday, the Greens pledged their 10 votes to the Labor party, but only after negotiating several important amendments to the bill and agreeing to postpone a proposed overhaul of the NDIS for eight weeks.
The minor party also agreed to support the tax changes after the government said it would remove a loophole that allowed investors with self-managed super funds (SMSFs) to borrow money to buy housing.
Super funds aren’t generally allowed to borrow for investments, but the loophole allowed SMSFs to borrow money to buy single assets like property if their loans were set up in certain ways.
These loans account for 1 per cent of all mortgages at the moment, but the Greens said this change would stop people flocking to SMSFs now that it has become harder to invest in property.
The Greens also negotiated for Labor to drop a clause in the bill that would have allowed the government to reverse the reforms in the future.
Capital gains tax discount and negative gearing changes
Under the new legislation, effective from 1 July 2027, investors will no longer qualify for the 50 per cent capital gains tax (CGT) discount on profits from the sale of assets.
Instead, profits on sold assets — that is, capital gains — will be replaced by a cost-based indexation and a minimum 30 per cent tax rate.
Earlier this month, the government announced it was investigating a carve-out for startup founders, employees who receive shares, and early investors, recognising the sector’s reliance on the potential for significant returns to attract capital and talent.
Those carve-outs are currently under consultation.
Businesses earning less than $10 million a year will also still be eligible for a 50 per cent CGT discount.
The new legislation also locks in another cornerstone of the Albanese government’s May budget by abolishing negative gearing for established properties.
The changes to negative gearing only apply to homes purchased or under contract before 7.30pm AEST on 12 May 2026.
New builds and some government housing programs will still be eligible for negative gearing.
Workers to get new tax offset and $1,000 instant deduction
The legislation also includes key changes to how much tax working Australians will pay in future financial years.
From 1 July 2027, every working Australian will automatically qualify for the $250 Working Australian Tax Offset.
This change effectively increases the tax-free threshold for workers by $1,800 to $19,985.
The bill also locks in a $1,000 “instant” tax deduction for work-related expenses in the 2026-27 financial year, replacing the current $300 limit on receipt-free deductions.