The inherent complications of ‘rushed’ tax reform

The institute supports the efforts to improve Australia’s tax system, recognising the complex and challenging nature of meaningful tax reform. However, it warned that rushing into a change of such high magnitude may have dire consequences, without the consultation of taxpayers, tax professionals, businesses and the broader community.

As reported, the bill – which is being criticised for its lack of clarity and structure: introduced four measures announced in the Federal Budget 2026-27, indicating changes to the CGT discount, limitations on negative gearing, the Working Australians Tax Offset, and the introduction of a standard deduction for work-related expenses.

CA ANZ outlined the impacts on the respective key aspects from the bill: effects of capital gains tax, impact on small business and start-ups, impacts of negative gearing and personal income tax.

CA ANZ Australian leader of tax, superannuation and financial services, Susan Franks, said CGT changes represented one of the most substantial updates to the system in decades.

"The scale of change introduces significant complexity, particularly around transitional arrangements, the valuation of assets and the interaction between old and new rules.”

“This will be especially challenging for small business owners, where assets such as goodwill are harder to value and compliance costs may be higher.”

Regarding small businesses and start-ups, Franks said the current tax rules overlooked business growth realities, but recommended reviewing outdated thresholds unchanged since 2007.

"Given how business values have changed over the past 20 years, it is timely to consult on whether the thresholds remain appropriate,” she said.

Negative gearing changes, she added, represent a major shift for many investors.

"Restricting negative gearing to new residential properties will shape investment decisions, changing cash-flow dynamics and adding complexity that taxpayers and advisers will need to navigate carefully.”

Meanwhile, Franks welcomed the steps in working on the personal income tax system, with a $1,000 standard deduction for work-related expenses being introduced on July 1.

As reported, the bill has been referred to the Senate Economics Legislation Committee for inquiry and report by 22 June 2026, which allows for only a short window of around three weeks for stakeholders to examine and respond to complex changes that will have long-term implications for many Australians and businesses.

The Tax Institute noted that this is the only formal opportunity for stakeholders to provide feedback on the measures, marking a worsening of the government's poor track record of consultation.

Julie Abdalla, Head of Tax & Legal at The Tax Institute, said the approach represented an alarming shift in how tax measures are developed.

“The Government’s failure to consult on measures of this scale is deeply concerning. The proposed changes to the CGT discount and negative gearing have far-reaching implications for Australian taxpayers and our economy.”

Perhaps ironically, despite the biggest tax changes in recent times, no experts were engaged in the process of developing these changes.

“Not a single professional tax association, representing hundreds of thousands of tax professionals collectively, was consulted on these measures before legislation was introduced,” Abdalla said.

Australians ultimately lacked the opportunity to have a say in this reform, with the measures not being taken to the election as specific commitments, thus not being subject to public examination through the electoral process either.

"These reforms were not measures that Australians were asked to vote on at the election. Given their significance, it is entirely reasonable to expect that taxpayers would have an opportunity to consider the proposals and express their views before legislation is introduced,” Abdalla said.