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Tax Reform No. 1 has five schedules and three different start dates. No. 2 adds narrow negative-gearing exceptions.
The quarantine applies to established dwellings acquired at or after 7:30pm AEST on 12 May 2026 (for a purchase, the contract date counts, not settlement), subject to the limited exceptions described below; dwellings last acquired before it are grandfathered.
No. 71 extends only those exceptions for certain surviving spouses, co-owners and relationship-breakdown transfers; an inheritance or transfer alone does not qualify.
The enacted Acts are linked below. The CGT timing and negative-gearing provisions discussed here were checked against those texts on 4 October 2026.
Almost every summary of this Act treats it as one change landing on 1 July 2027. It is not. A schedule commences on the day the Act says it takes effect as law, and separately specifies the income years the amendments apply to.
Every schedule below has already commenced, and the one that reaches the most people applies to the income year we are in.
| Schedule | Commenced | First applies to |
|---|---|---|
| Schedule 4, Part 1s25-130 standard deduction of $1,000, and the s25-100(1A) transport expense definition | Commenced: 1 July 2026 | First applies to: Assessments for 2026–27 and later (the income year we are in) |
| Schedule 5Limited recourse borrowing arrangements: an SMSF's borrowed-asset real property must be business real property | Commenced: 10 August 2026 | First applies to: Arrangements entered into on or after commencement. Pre-existing borrowings, refinances of them and acquisitions under a pre-commencement arrangement are unaffected |
| Schedule 3ss61-155 and 61-160 working Australians tax offset, up to $250 | Commenced: 1 July 2026 | First applies to: Assessments for 2027–28 and later (a year behind Schedule 4) |
| Schedule 2Negative gearing quarantined for established residential dwellings | Commenced: 27 June 2026 | First applies to: The 2027–28 income year and later |
| Schedule 1General CGT discount replaced for post-reset growth, CPI indexation, possible 30% minimum-tax top-up | Commenced: 1 July 2026 | First applies to: Assessments for the income year that includes 1 July 2027 and later years for the Division 102 and 152 amendments, the Subdivision 115-C amendments and new Subdivision 115-CA; new s115-235 (trustee statements to beneficiaries, where the Commissioner requires them) applies in relation to that income year and later years; the s115-125 changes and the Division 119 minimum tax apply to CGT events on or after 1 July 2027 |
| Schedule 4, Part 2FBT: salary-packaged expense payment benefits and the eligible work related item list | Commenced: 1 July 2026 | First applies to: FBT years starting on or after 1 April 2027 |
Sourced to the enacted commencement tables and application items: No. 49 Schedule 1 Part 4 items 82-84, Schedule 2 item 5, Schedule 3 Part 2 item 4, Schedule 4 Parts 1 and 2 items 17(1) and 20, and Schedule 5 item 2; No. 71 Schedule 4 item 5.
Applied in the Tax Refund Estimator
Old law vs new law, side by side
Check your property in three questions
Full cash flow with the quarantine applied
Section 25-130 of the ITAA 1997, inserted by Schedule 4, gives an individual who is an Australian resident at any time in the income year and who derives assessable labour income a deduction for work-related expenses.
It applies to assessments for the 2026–27 income year and later, which makes it the only part of this Act already affecting the return most Australians will lodge next.
It is a floor, not a bonus. The amount is the lesser of $1,000 and your total assessable labour income, reduced — but not below zero — by your own work-expense deductions:
So your effective work-expense deduction becomes whichever is larger, your real claims or $1,000, capped at your labour income.
Claims nothing
s25-130 adds $1,000
$1,000
total work-expense deduction
Claims $400
s25-130 adds $600
$1,000
total work-expense deduction
Claims $1,500
s25-130 adds $0
$1,500
total work-expense deduction
All three are worked out on $80,000 of wages, by the same engine the Tax Refund Estimator uses. Note the middle one: the $400 claim does not add to the $1,000 — it is absorbed by it.
Four things are disregarded, and they stack on top. Subsection (3) tells you to ignore, for the reduction, any s8-1 deduction for:
Union and professional association fees therefore do not eat into the $1,000: someone on $80,000 of wages whose only work-related claim is $600 of union fees deducts $1,600, not $1,000.
It cannot exceed your labour income. Paragraph (2)(b) caps it, so a student with $800 of wages deducts $800, not the full amount. And "assessable labour income" in s25-130(4) means pay an employer must withhold from — salary and wages, directors' fees, office holders, termination payments, parental leave pay.
Business and investment income are not in the list, so a sole trader with no wages gets nothing from s25-130.
In cash, $1,000 off taxable income is worth $320 to someone on $80,000 and $470 at $250,000 — both computed here including the Medicare levy, not quoted from a headline rate.
Schedule 4 also narrows what a "transport expense" is. New s25-100(1A) defines it as a loss or outgoing to do with transport, including the decline in value of a depreciating asset used in connection with transport, but excludes accommodation, food and drink and expenditure incidental to transport.
Parking is on the wrong side of that line, which is why our car expense calculator now claims parking at its own work-related amount instead of running it through the logbook business-use percentage.
The same schedule repeals the award transport payment machinery in Subdivision 900-I and s28-180, and stops assets used mainly to produce labour income being allocated to a low-value pool.
Schedule 3 inserts Subdivision 61-E. You are entitled to the offset if you are an individual who is an Australian resident at any time in the income year and your net labour income exceeds the tax-free threshold.
Net labour income is a defined subtraction: labour amounts less labour deductions. Labour amounts are your assessable labour income, income from carrying on a business as an individual, personal services income, employee share scheme discounts included under s83A-25, and labour hire payments.
Labour deductions are the outgoings incurred in earning those amounts, the s25-130 standard deduction itself, and depreciation on the assets used to earn them.
The amount, under s61-160, is the lesser of $250 and the basic income tax liability you would have if your taxable income were your net labour income and nothing else.
That makes it phase in across the first tax bracket rather than arriving whole: it reaches the full $250 at $19,986 of net labour income for 2027–28, and is smaller below that.
It is non-refundable, cannot be transferred and cannot be carried forward, so it reduces income tax to zero and no further.
It does not apply to a 2026–27 return. Schedule 3 commenced on the same day as Schedule 4 — both on 1 July 2026.
Its application item covers assessments for the 2027–28 income year and later. Two schedules, one commencement date, two different first income years.
For ordinary assets, individuals and trusts other than complying superannuation entities lose the general 50% CGT discount on post-reset growth from 1 July 2027.
Eligible later expenditure is indexed by CPI from the quarter the expenditure was incurred to the quarter of disposal (the same method used before 1999), and a 30% minimum tax applies as a top-up if ordinary marginal-rate tax on the gain would otherwise come in under that rate. Companies and complying super funds are unaffected.
Subject to the Act’s exclusions, an ordinary post-1985 asset held across the change is treated as sold at market value just before 1 July 2027and bought back at that value just after: a deemed disposal and reacquisition, not a pro-rata split of one gain.
The gain to that point is deferred to the real sale and can keep the 50% discount when that sale meets the 12-month test. Later growth is indexed under the new rules.
Assets bought before 20 September 1985 follow different reset rules and generally lose their pre-CGT exemption only for growth after the change.
Income-support recipients (including Age Pensioners, JobSeeker, Carer Payment, DVA pensioners and several other listed payments) are exempt from the minimum tax top-up for any income year they receive a qualifying payment. Ordinary tax on the gain at marginal rates still applies as usual.
From the 2027-28 income year, a net rental loss on an established (previously occupied) residential dwelling contracted at or after 7:30pm AEST on 12 May 2026 is ordinarily quarantined. It can only offset residential rental income or a residential capital gain, not wages or other income.
It isn't forfeited: it carries forward and pools with your other quarantined residential properties per taxpayer, not per property, until you have residential income or a gain to use it against.
An ownership interest acquired before the cutoff is grandfathered. A residential dwelling that meets the statutory new-dwelling test in relation to you is also outside the quarantine regardless of when you acquire it.
Treasury Laws Amendment (Tax Reform No. 2) Act 2026 (No. 71, 2026) Schedule 4 amends the negative-gearing rules inserted by No. 49 Schedule 2. It commenced 1 October 2026 and its amendments apply from the 2027-28 income year. The changes add limited extensions to the acquisition-date and new-dwelling exceptions. See the as-made No. 71 Schedule 4 text.
These rules do not exempt every later inheritance or transfer. For the tests, subsections 26-155(3AA) and (3AB) disregard a deemed acquisition under s118-192(2). Section 26-159 also carries qualifying new-dwelling status to the acquired interest for CGT purposes under s115-102(2).
The detailed new-dwelling requirements are delegated by s26-160(3)-(4) to a Ministerial legislative instrument. The relevant requirements depend on that instrument and the facts of the ownership interest.
"New residential dwelling"
The Act delegates the detailed requirements to a Ministerial legislative instrument (s26-160(3)-(4)); this page lists no qualifying dwelling types. The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 (introduced on 14 October 2026, passed by the House of Representatives on 29 October 2026, yet to pass the Senate) would define the term, but it is a proposal, not law.
Deferred-gain reconciliation mechanics
The Act defers the notional gain/loss from the deemed disposal at commencement rather than taxing it immediately (s112-160(2)), but the exact reconciliation mechanics at the real, later disposal (s112-160(3)-(4)) aren't pinned to primary text yet.
How s25-130 interacts with the substantiation rules
Schedule 4 repeals ss900-35 to 900-45 and Subdivision 900-I. ATO guidance (standard deduction page, updated 14 Sep 2026, read 26 Oct 2026): from 1 July 2026 those record-keeping exceptions end for everyone, and claiming above the $1,000 standard deduction needs written evidence for every work expense. Draft ruling LCR 2026/D5 backs it, so it may still move.
Whether a working holiday maker gets the standard deduction
s25-130(1)(b) needs an Australian resident at any time in the income year, and a working holiday maker can be one. Our calculators cannot tell from a residency selector alone, so they take the conservative reading and leave the deduction out rather than granting a $1,000 deduction the taxpayer may not be entitled to.
Named CPI series
The indexation formula itself is sourced directly to the Act (s960-275(1B)/(1C)); which published ABS series 'index number' refers to is inferred from the historical pre-1999 definition, not independently re-verified against this Act's current text.
Royal Assent — Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (No. 49, 2026) and its companion (No. 50) become law.
Every mechanic below verified directly against the Federal Register's full Act text and the Treasurer's second reading speech. See the sourcing note at the bottom of this page.
CGT reform calculator, negative gearing grandfathering checker and the rebuilt Negative Gearing Calculator published.
Schedules 3, 4 and 5 added. This page previously covered only the CGT and negative gearing schedules and said nothing about the $1,000 standard deduction, which has applied since 2026–27, a year earlier than anything else in the Act. s25-130 is now implemented in the Tax Refund Estimator and the commencement-versus-application table below distinguishes the five schedules' dates.
Treasury Laws Amendment (Tax Reform No. 2) Act 2026 (No. 71, 2026) Schedule 4 commenced 1 October 2026 and applies from the 2027-28 income year. The page now includes its conditional exceptions and separates the CGT assessment and event dates.
Yes. Schedule 4 applies to assessments for the 2026–27 income year and later, which is the year we are in. It inserts s25-130, a standard deduction for work-related expenses, and s25-100(1A), a narrower definition of "transport expense".
The amendments to Divisions 102 and 152 and Subdivision 115-C, and new Subdivision 115-CA, apply in relation to assessments for the income year that includes 1 July 2027 and later years.
New s115-235, which lets the Commissioner require trustees to give beneficiaries a capital-gains statement, applies in relation to that income year and later years. Separately, the s115-125 changes and the Division 119 minimum tax apply to CGT events on or after that date.
Negative-gearing quarantine applies from the 2027–28 income year and later, so the schedule affecting the most people is the one that arrived first.
No, and this is the part almost everyone gets backwards. s25-130(2) gives you the lesser of $1,000 and your total labour income, reduced by the work expenses you actually claim and floored at zero. It is a floor, not a bonus.
On $80,000 of wages: claim nothing and you deduct $1,000; claim $400 and s25-130 adds $600 for $1,000 in total; claim $1,500 and s25-130 adds $0. Your effective work-expense deduction is whichever is larger: your real claims or $1,000.
No. s25-130(3) disregards deductions for income protection insurance premiums, personal sickness insurance premiums, accident insurance premiums and membership of a trade, business or professional association. They stack on top instead of reducing it.
On $80,000 of wages with $600 of union fees and nothing else, you deduct $1,600: the fees plus the full $1,000.
Up to $1,000 off your taxable income, so its cash value is that times your marginal rate plus the Medicare levy. On $80,000 of wages with no work expenses claimed it is $320 of tax; on $250,000 it is $470. Someone who already claims more than $1,000 gets nothing from it.
Someone whose labour income is under $1,000 is capped at that income. $800 of wages means a $800 deduction, not $1,000.
2027–28, not 2026–27. Schedule 3 commenced on the same day as Schedule 4 but its application provision covers assessments for the 2027–28 income year and later, a full year behind.
When it does apply, s61-160 gives the lesser of $250 and the tax that would fall on your net labour income if that were your whole taxable income, so it phases in from the tax-free threshold and reaches the full $250 at $19,986 of net labour income.
It is non-refundable and cannot be carried forward.
They are still deductible where the ordinary rules allow, but from 2026–27 they are no longer "transport expenses". s25-100(1A) defines a transport expense as a loss or outgoing to do with transport but excludes accommodation, food and drink and expenditure incidental to transport.
Parking sits on the wrong side of that line too, so it is not part of a car or transport claim. It is claimed at its own work-related amount rather than at your logbook percentage.
Two things. First, From 1 July 2027, the general 50% CGT discount ends for post-reset growth on ordinary assets. Growth up to 30 June 2027 can keep the discount when the real sale meets the 12-month test. CPI cost-base indexation and a possible 30% minimum-tax top-up apply to eligible later growth.
Some residential-asset discounts and other statutory exceptions continue.
Second, net rental losses on an established residential dwelling acquired at or after 7:30pm AEST on 12 May 2026 (for a purchase, the contract date counts, not settlement) are ordinarily quarantined from the 2027-28 income year: they can only offset residential rental income or residential capital gains, not wages.
No. 71 adds conditional exceptions for specified death and relationship-breakdown transfers; an inheritance or transfer alone does not qualify.
No. From 1 July 2027, the general 50% CGT discount ends for post-reset growth on ordinary assets. Growth up to 30 June 2027 can keep the discount when the real sale meets the 12-month test.
Partnerships are not named in the Act: a partnership makes no discount capital gain in its own right, and a partner's share flows through to them. Companies and complying super funds keep their existing treatment.
New residential dwellings and affordable housing can retain a discount of at least 50% by default, and indexation is the alternative that can be chosen instead — for affordable housing, only where the discount would otherwise be 60%.
No. 71 section 26-159 extends the new-dwelling treatment for s115-102(2) to an acquired interest only where one of its specified transfer exceptions passes that status across.
No. It's a top-up, calculated separately (s119-10), that only applies if your ordinary marginal-rate tax on the gain would otherwise come in under 30% of it. If your marginal rate is already 30% or higher on the gain, the top-up is zero.
For an ordinary asset reached by the reset, the Act generally treats it as sold at market value just before 1 July 2027 and bought back just after: a deemed disposal and reacquisition, not a pro-rata split. Statutory exclusions and an available apportioning-method choice can change that result.
The deferred pre-reset gain can keep the current 50% discount when the real sale meets the 12-month test; eligible post-reset growth is indexed under the new rules.
Age Pensioners and recipients of several other listed income-support payments (JobSeeker, Carer Payment, DVA pensions, Family Tax Benefit and others) are exempt from the 30% minimum tax top-up for any income year they receive a qualifying payment (s119-15). Ordinary marginal-rate tax on a gain still applies as usual.
An ownership interest contracted before 7:30pm AEST on 12 May 2026 remains grandfathered. Under No. 71, a surviving spouse, a non-spouse surviving co-owner or a transferee under a specified s126-5 relationship-breakdown arrangement may also qualify if the deceased owner or transferor met the relevant pre-cutoff or new-dwelling test.
For a non-spouse co-owner, both owners must meet the matching test. An inheritance or transfer alone is not enough.
The No. 49 Act leaves the detailed new-dwelling requirements to a Ministerial legislative instrument under s26-160(3)-(4).
The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 (introduced on 14 October 2026, passed by the House of Representatives on 29 October 2026, yet to pass the Senate) would define the term, but it is a proposal, not law.
No. 71 carries new-dwelling status to another interest only in its specified surviving-spouse, co-owner and relationship-breakdown cases, when their statutory conditions are met.
Pre-CGT assets lose their blanket exemption for growth after 1 July 2027 (s112-175). Growth up to that date stays exempt; growth after it is taxable, via the same deemed-disposal mechanism used for the general apportionment.
Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (No. 49, 2026), Royal Assent 26 June 2026; Treasury Laws Amendment (Tax Reform No. 2) Act 2026 (No. 71, 2026), Royal Assent 26 August 2026. As-made texts: No. 49 and No. 71 Schedule 4.
The No. 49 CGT timing and negative-gearing provisions, plus No. 71 Schedule 4, were checked against the enacted texts on 4 October 2026. Other No. 49 schedule details were last verified 2 August 2026.
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