Treasury Laws Amendment (Tax Reform No. 1) Act 2026 — A Plain-English Guide

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 — Act No. 49 of 2026, register ID C2026A00049 — received Royal Assent on 26 June 2026. It is the legislation behind the property tax changes most investors know as “the July 2027 CGT reform”, and it does considerably more than that: it also quarantines negative gearing to new builds, creates a new tax offset, introduces a standard deduction, and (via a Senate addition) amends superannuation borrowing rules.

Since Assent, searches for the Act’s name, its register ID and its status have surged — and most of what ranks is either the raw legislation or commentary written about the Bill, which the Senate amended materially before passage. This guide covers the Act as made, schedule by schedule, in plain English: what each part does, when it commences versus when it actually applies, and which pieces of the machinery still don’t exist. All section references were verified against the full text of the Act as made; sources are listed at the end.

One structural point first: there are actually two Acts. Act No. 49 contains the machinery; a separate Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (Act No. 50, assented the same day) imposes the 30% minimum rate — the standard constitutional split between an assessment Act and an imposition Act.

The five schedules at a glance

Commencement is not application

The single most common misreading of this Act: its CGT provisions commenced on 1 July 2026, but they apply to gains accruing on or after 1 July 2027 — the Act’s application provision ties the new rules to “assessments for the income year that includes 1 July 2027 and for later income years”, i.e. 2027-28. Nothing about your CGT position changed on 1 July 2026. What did change immediately is negative gearing’s grandfathering line: whether a dwelling escapes the new quarantining rules was fixed at 7.30pm on 12 May 2026.

Schedule 1 — what actually happens to the CGT discount

The discount is replaced by indexation, not simply abolished

For CGT events on or after 1 July 2027, the discount percentage for gains that previously attracted 50% becomes 0% (new s 115-100(f) of the ITAA 1997) — and in its place, a new s 110-36(1A) lets Australian resident individuals and trusts include CPI indexation of the cost base (except the third element) when working out the gain. Several things survive. The new s 115-1 states: “For a discount capital gain from a CGT event happening on or after 1 July 2027, a discount of at least 50% continues to be available if the CGT event relates to a new residential dwelling or to the provision of affordable housing.” In full:

• Gains from CGT events before 1 July 2027 keep the 50% discount.
• Eligible new residential dwellings: investors can choose the 50% discount or the new indexation-plus-minimum-tax treatment (s 115-102).
• Affordable housing: the existing discount of up to 60% is retained (s 115-125).
• The main residence exemption and the four small business CGT concessions are untouched.

Who is outside the new regime entirely: companies (which never had the 50% discount), complying superannuation entities — the Treasurer’s second reading speech is explicit that “superannuation funds (including SMSFs) will be excluded” — life insurance companies, and foreign or temporary residents (who lost discount access in 2012 and do not gain indexation access: see the note to s 110-36(1A)). We covered the SMSF position in detail in why SMSF property is insulated from the July 2027 reform.

The 30% minimum tax is a top-up on individuals, not a flat rate

New Division 119 (machinery, Act No. 49) plus s 12AA of the Income Tax Rates Act 1986 (rate, Act No. 50) create what the Act calls extra income tax on a “minimum tax capital gain”. It applies to individuals only — s 119-10(1)(a) — and works as a method statement: compute 30% of the minimum tax capital gain, compare it with the income tax actually attributable to that gain at your marginal outcome, and pay the shortfall if there is one. If your gain already bears at least 30%, nothing changes.

The Senate hardened one important feature: the income-support exemption is written directly into the Act (s 119-15) rather than delegated to a ministerial instrument as the Bill had proposed. Anyone who receives, at any time in the income year, a listed payment — age pension, JobSeeker, disability support pension, carer payment, parenting payment, Austudy, youth allowance, family tax benefit, farm household allowance, parental leave pay, ABSTUDY living allowance, veterans’ pensions and MRCA payments, among others — is outside the minimum tax for that year.

Gains on eligible new residential dwellings and affordable housing are excluded from the “minimum tax capital gain” definition (s 119-5).

The 1 July 2027 deemed sale — where valuation enters the Act

The transition is built on a deemed sale: under new Subdivision 112-E, an asset you hold on 30 June 2027 and realise later is treated as sold just before 1 July 2027 and reacquired just after, with capital proceeds equal to the asset’s market value just before 1 July 2027 (ss 112-155 for individuals, 112-165 for trusts). The pre-2027 portion of the gain keeps its old treatment (50% discount) and is deferred until you actually sell; the post-2027 portion gets the new indexation treatment.

Two consequences worth underlining:

1. Market value at 1 July 2027 is the statutory default. Section 112-185 lets the Minister determine, by legislative instrument, an optional alternative apportionment method — but as at 17 July 2026 no such instrument has been registered (we checked the Federal Register directly). Until it is, the market-value pathway is the only one actually in the law. Our analysis of the apportionment formula’s blind spots explains why a formula tends to disadvantage properties whose growth was front-loaded.
2. Pre-CGT assets lose their blanket exemption. Under s 112-175, an asset that is pre-CGT (acquired before 20 September 1985) on 30 June 2027 is reset: gains accrued up to 1 July 2027 stay exempt, but growth after that date becomes taxable, with the cost base reset to market value at 1 July 2027. The Government has consistently framed this as applying to individuals, partnerships and trusts; companies sit outside the new indexation and minimum tax regime, though the transitional wording does not expressly carve them out of every provision — entity-specific positions warrant advice.

A defensible, contemporaneous record of market value at 1 July 2027 is therefore the anchor evidence for every one of these calculations — see how to prepare for the 1 July 2027 valuation and our CGT valuation service.

Schedule 2 — negative gearing quarantined to new builds

New s 26-155 of the ITAA 1997 provides that where deductions relating to “the using or holding of residential dwellings as residential accommodation” exceed the assessable income from them, the excess is not deductible that year — it becomes a “quarantined amount” carried forward against future residential rental income or, on the property’s eventual sale, into the CGT calculation. Rental losses stop offsetting salaries; they roll forward instead.

The boundaries, all in the Act:

• Grandfathering: dwellings “last acquired before 7.30 pm, by legal time in the Australian Capital Territory, on 12 May 2026” (Budget night) are excluded — and acquisition timing runs from entering the contract, so pre-Budget-night contracts that settled later are grandfathered. There is no cap on how many grandfathered properties an investor holds.
• New residential dwellings are exempt — but the definition of “new residential dwelling” is delegated to a ministerial legislative instrument (s 26-160(4)) that has not yet been made.
• Excluded entities: widely held unit trusts and complying superannuation entities (s 26-155(4)).
• Scope: the quarantining applies to individuals, partnerships, companies and most trusts — and to residential accommodation only. Caravans, mobile homes, hotels, motels, hostels, student accommodation and boats are outside the “residential dwelling” definition.
• Application: income year 2027-28. On bankruptcy, unused quarantined amounts are extinguished (s 26-155(8)-(9)).

The Act even carries its own worked example (“Henrietta”, in s 26-155): a dwelling acquired in July 2028 returns $50,000 of rental income against $65,000 of deductions in 2028-29 — she deducts $50,000 and carries $15,000 forward.

Schedules 3, 4 and 5 — the rest of the Act

• Working Australians tax offset (Schedule 3): up to $250 a year for resident individuals with work income, from 2027-28.
• Standard deduction (Schedule 4): a $1,000 instant deduction for work-related expenses without receipts, from 2026-27 — the only measure in the Act affecting income tax assessments for the current income year.
• Limited recourse borrowing arrangements (Schedule 5): amendments to the Superannuation Industry (Supervision) Act 1993, added during Senate passage, commencing 10 August 2026.

The Senate’s changes matter more broadly: the Bill as introduced had four schedules and delegated the pensioner exemption; the Act as made has five and hardcodes it. Commentary written before 25 June 2026 — including the Parliamentary Library’s Bills Digest — describes the Bill, not the final law.

What still doesn’t exist (as at 17 July 2026)

The Act is in force, but three pieces of delegated machinery and the practical guidance are still pending:

Anyone quoting a “specified apportionment formula” with numbers in it is quoting the Treasury factsheet’s illustration, not operative law.

What the change costs in practice

Treasury’s own explainer illustrates the transition with “Jane”: an asset bought on 1 July 2022 for $800,000 and sold on 1 July 2032 for $1.6 million, with a market value of $1,131,371 at 1 July 2027, produces a taxable gain of about $485,643 under the new rules against $400,000 under the old 50% discount — roughly $40,000 more tax at the top marginal rate, on Treasury’s growth assumptions. Our city-by-city analysis of the accrued-gain exposure translates that into current market numbers, and the CGT calculator lets you model your own holding.

Frequently asked questions

Is the 50% CGT discount abolished?

Not exactly — for CGT events from 1 July 2027 the general discount rate becomes 0% and is replaced by CPI indexation of the cost base for resident individuals and trusts. But the 50% discount survives for gains from events before 1 July 2027 (including the deferred pre-2027 portion of assets held across the date), remains available by election for eligible new residential dwellings, and the affordable housing discount of up to 60% is fully retained.

When does the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 take effect?

It received Royal Assent on 26 June 2026 and its schedules commenced between 27 June and 10 August 2026 — but commencement is not application. The CGT changes apply to gains accruing from 1 July 2027 (2027-28 assessments onward), negative gearing quarantining applies from the 2027-28 income year with a grandfathering cut-off of 7.30pm on 12 May 2026, the $1,000 standard deduction applies from 2026-27, and the $250 offset from 2027-28.

Do SMSFs and super funds pay the new minimum tax?

No. Complying superannuation entities, including SMSFs, are excluded from the reform entirely — they keep their existing one-third discount, and the 30% minimum tax applies to individuals only. Companies are also outside the new regime, as are foreign and temporary residents (who already lost discount access in 2012).

What happens to pre-1985 (pre-CGT) assets?

They lose their blanket exemption at the transition: gains accrued up to 1 July 2027 remain exempt, but growth after that date becomes taxable for individuals, partnerships and trusts, with the cost base reset to the asset’s market value at 1 July 2027. That reset makes a contemporaneous market valuation at the transition date the key piece of evidence for these assets.

Is negative gearing gone?

No — it is quarantined, not abolished. Residential rental losses can no longer offset salary or other income (from 2027-28) unless the dwelling is an eligible new build or was acquired before 7.30pm on 12 May 2026, which remains negatively gearable with no cap on the number of grandfathered properties. Quarantined losses carry forward against future residential rental income or the eventual capital gain.

Sources

• Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (C2026A00049) — Federal Register of Legislation, Act as made (full text read directly)
• Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (C2026A00050) — the imposition Act (30% rate)
• Bill r7493 — passage history — Parliament of Australia (Senate amendments, 25 June 2026)
• Treasury — Negative Gearing and Capital Gains Tax Reform explainer (PDF) — Budget 2026-27 factsheet (worked examples)
• Treasurer’s second reading speech, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 — House of Representatives Hansard, 28 May 2026 (superannuation exclusion)
• Parliamentary Library, Bills Digest No. 67, 2025-26 (describes the Bill as introduced — superseded on the amended points)

This article is general information about legislation, not tax advice. How the Act applies depends on your entity structure, residency and the delegated instruments still to be made — confirm your position with your tax adviser before acting.

See also

• 1 July 2027 CGT valuation — how to prepare
• The apportionment formula’s blind spots
• CGT reform impact by capital city
• Why SMSF property is insulated from the reform
• Capital Gains Tax valuations — the flagship service page, and the CGT calculator

Last verified: 17 July 2026 against the Act as made on the Federal Register of Legislation. Delegated instruments and ATO guidance are pending — this article is reviewed as they are published.