Both assented to on 26 June 2026, Act No. 49 of 2026 replaces the 50% CGT discount with cost base indexation and a 30% minimum rate, adding a standard work-expense deduction and a Working Australians tax offset, while Act No. 50 of 2026 inserts section 12AA into the Income Tax Rates Act 1986 to set a formula-based levy on minimum tax capital gains, both largely effective from 1 July 2026.
Australia has enacted the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026) and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (Act No. 50 of 2026), with both Acts receiving the royal assent on 26 June 2026.
Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026)
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 introduces significant structural changes to how capital gains are calculated and taxed for individuals, trusts, and partnerships, particularly concerning the transition away from the standard 50% discount toward a system of cost base indexation and a minimum 30% tax rate. The legislation also details the implementation of a standard deduction for work-related expenses and establishes a Working Australians tax offset.
Earlier, Australia’s Parliament passed the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 on 25 June 2026, which is a key component of the 2026–27 Federal Budget tax package.
The Income Tax Rates Amendment (Tax Reform No. 1) Act 2026
The Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 is designed to modify the Income Tax Rates Act 1986. Officially passed on 26 June 2026, the primary objective of this law is to introduce a specific rate of additional income tax on minimum tax capital gains. The document outlines a mathematical formula used to determine this extra levy, which relies on the relationship between a taxpayer’s minimum tax gap amount and their capital gains. Most provisions within this reform were scheduled to take effect on 1 July 2026. By integrating these new sections, the government aims to refine how minimum tax obligations are calculated and enforced for residents.
The key details of the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (Act No. 50, 2026) are:
Purpose and amendments
The Act amends the Income Tax Rates Act 1986. The Act serves as a bridge between two existing tax frameworks. It inserts a new section (12AA) into the 1986 Act, but relies entirely on the Income Tax Assessment Act 1997 to actually define what the “minimum tax capital gain” and “minimum tax gap amount” are. It exists simply to establish the mathematical formula that calculates the extra tax rate on those specific gains.
Tax rate formula and definitions
The rate is calculated by dividing the Minimum tax gap amount for the year by the Minimum tax capital gain for the year. Both the “minimum tax capital gain” and the “minimum tax gap amount” are based on their meanings within the Income Tax Assessment Act 1997 and are calculated in whole dollars.
