Tax reform for workers, businesses and future generations

Australia’s Albanese Labor Government has unveiled its most significant tax reform package in over 25 years, targeting workers, businesses, and first-home buyers. The reforms aim to reduce tax liabilities for 13.3 million workers, with a permanent $250 Working Australians Tax Offset (WATO) taking effect for income earned in the second half of 2027. Additionally, a $1,000 instant tax deduction will allow workers to reduce taxable income without receipts, building on legislated tax cuts set to begin in July 2026 and 2027. The package also introduces stricter rules for negative gearing, limiting deductions to new residential builds starting in 2027-28 while preserving existing arrangements for pre-12 May 2026 investments. The 50% capital gains tax (CGT) discount will be replaced with inflation-adjusted indexation from July 2027, applying a minimum 30% tax rate on gains—except for new builds, where both old and new rules will apply. Discretionary trusts will face a minimum 30% tax rate from 2028-29 to align tax outcomes with wage earners. The reforms are designed to support 75,000 additional homeowners over the next decade by easing housing market access and incentivizing productive investment. The government claims the changes will create a fairer, simpler tax system while reducing compliance costs by $540 million annually. Over $3.5 billion in new business tax measures will encourage investment and innovation, reinforcing the package’s focus on economic growth and sustainability. The WATO will raise the effective tax-free threshold for workers by nearly $1,800, the largest permanent increase since 2012-13, while reforms to trusts and CGT aim to reduce debt and fund broader tax relief. The government frames the package as pro-aspiration, pro-worker, and pro-investment, addressing long-standing barriers to homeownership and economic participation.