Tax News and Updates June 2026

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1.

First tranche of 2026-27 Budget tax reforms introduced into Parliament

The Government has introduced the first tranche of tax reform legislation, with the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 formally introduced into Parliament on 28 May 2026.

Schedule 1 - Capital gains tax

The Bill proposes to replace the 50% CGT discount (currently available for individuals, trusts and certain partnerships) with cost base indexation. Key exceptions include:

• investors in new residential dwellings may choose between the 50% CGT discount or indexation; and
• investors in affordable housing may similarly choose between the existing discount of up to 60% or indexation.

A 30% minimum tax on capital gains will also be introduced, with limited exceptions for certain income support recipients.  There are no changes to the small business CGT concessions.

These new rules will apply to all capital gains arising on or after 1 July 2027, including gains from pre-CGT assets.  Gains on pre-CGT assets accrued before 1 July 2027 remain exempt.

Transitional rules deem CGT assets acquired before 1 July 2027 to be disposed of and reacquired at market value on that date.  Any gain or loss from the deemed disposal is deferred until actual disposal, at which point the taxpayer recognises a pre-reform component (under old law) and a post-reform component (under new law).

Schedule 2 - Negative gearing

From 1 July 2027:

• net rental losses on residential dwellings acquired after 7:30PM AEST on 12 May 2026 will be quarantined against assessable income derived from residential dwelling. The excess is carried forward to future income years and may be applied to reduce capital gains from residential dwellings; and
• negative gearing will continue to apply to new residential dwellings and other residential dwellings that are determined by the Minister.

Newly built residential dwellings are excluded, meaning investors who acquire new dwellings can continue to deduct net rental losses against other assessable income.

Properties purchased prior to 7:30pm AEST on 12 May 2026 are also exempt.

Schedule 3 - Working Australians Tax Offset

From the 2027-28 income year Australian resident individuals earning labour income will receive a non-refundable Working Australians Tax Offset of up to $250.

The amount available depends on the individual's net labour income and is not available to individuals whose net labour income does not exceed the tax-free threshold.

Schedule 4 - Standard deduction for work-related expenses

From the 2026-27 income year, Australian resident individuals earning labour income can now claim a standard $1,000 instant tax deduction for work-related expenses without substantiation.

Individuals with more than $1,000 in genuine work-related expenses may instead itemise and substantiate their claims.

Treasury Laws Amendment (Tax Reform No. 1) Bill 2026

2.

2026-27 Federal Budget 

On 12 May 2026, the Treasurer delivered the 2026–27 Federal, outlining a three pillar tax reform agenda directed at a “fairer”, “better” and “simpler” tax system.

Trusts and individual measures

In addition to the proposed CGT and negative gearing changes (for which draft legislation was introduced into Parliament on 28 May 2026 - see above), the Budget introduces several measures affecting individuals and closely held structures:

• trustees of discretionary trusts to be taxed at a minimum rate of 30% from 1 July 2028;
• increase to Medicare levy low income thresholds will increase by 2.9% from 1 July 2025;
• removal of the age based uplift in the private health insurance rebate from 1 April 2027; and
• measures relating to foreign ownership of housing will be extended and tightened.

Business and investment measures

Key business related measures include:

• transition to a permanent 25% FBT discount for certain electric vehicles;
• permanent extension of the $20,000 instant asset write-off for small business;
• introduction of a 2year loss carryback regime for companies with turnover up to $1 billion from 1 July 2026
• startup loss refund rules (capped) for early stage businesses will apply from 1 July 2028;
• reforms to the R&D tax incentive from 1 July 2028;
• expansion of VCLP and ESVCLP regimes from 1 July 2027; and
• amendments to global and domestic minimum tax rules from 1 January 2026.

Indirect tax and administration

The Budget also includes measures relating to administration and indirect taxes:

• extension of indirect tax concession refunds and abolition of certain nuisance tariffs;
• additional funding to address the illicit tobacco market;
• expansion of monthly PAYG reporting and payment arrangements from 1 July 2027;
• further investment in ATO compliance, fraud prevention and Digital ID systems; and
• reforms targeting regulatory systems, ABN integrity and data sharing frameworks.

Budget 2026-27

3.

Coalition Budget Reply 2026: Key tax measures

Opposition Leader Mr Angus Taylor delivered the Coalition’s 2026 Budget Reply in the House of Representatives on 14 May 2026, outlining a number of proposed tax policy positions.

Proposed tax measures

Key taxrelated commitments announced include:

• Repeal of the Budget measures affecting negative gearing and CGT, with a return to the current law (no further detail provided).
• Introduction of a “tax back guarantee”, involving:
• indexation of the two lowest personal income tax thresholds from 2028-29, and
• indexation of the top two thresholds from 2031-32.
• A permanent instant asset writeoff of up to $50,000 for businesses with turnover of less than $10 million (no commencement date specified).
• An intention to end “tax breaks for electric vehicles”, which appears directed at existing FBT concessions and related settings (although the specific measures to be repealed were not identified).

House of Representatives

4.

ATO releases Decision Impact Statement on Shaw – meals claimed by long distance truck driver

The ATO has issued a Decision Impact Statement (DIS) on the Federal Court’s decision in Federal Commissioner of Taxation v Shaw [2026] FCA 197, in which the Commissioner’s appeal from the ART was dismissed in full.

The case concerned whether a long distance truck driver was entitled to a deduction under section 8-1 of the ITAA 1997 for work-related travel expenses for meals in the 2020-21 income year.

Facts

The taxpayer drove long distances through remote parts of Australia, was away from home six days per week and slept in his truck.

He claimed $32,782.50 for meal expenses based on the Commissioner's reasonable daily amounts published in TD 2020/5, asserting he spent more than the maximum reasonable amount but claimed only the lower published figure.  At audit, the taxpayer did not provide written evidence of the deductions claimed and relied on the exception from the substantiation provisions on the basis he was the recipient of a travel allowance.

Federal Court outcome

The Federal Court dismissed the Commissioner's appeal on all grounds.  The Federal Court confirmed that:

• the ART did not err in accepting the taxpayer’s evidence that the expenses were incurred;
• there was no reversal of the onus of proof, with the taxpayer establishing deductibility under s 81 of ITAA 1997;
• precise apportionment was not required where a broad and reasonable basis existed; and
• the ART did not apply any standalone “reasonableness” test in determining deductibility.

ATO view

The ATO considers the decision in Shaw confirms that:

• deductibility under s 81 must be established first, before substantiation rules are considered;
• the substantiation exceptions in Div 900 do not remove the need to show that expenses were incurred; and
• the Commissioner should not require detailed records where a valid substantiation exception applies.

The ATO also emphasised that the decision does not create an automatic deduction based on reasonable allowance amounts nor does it remove the need for apportionment of private expenditure, which remains facts pecific.

The ATO is reviewing the impact of the decision on existing guidance, including TR 2004/6 Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses, and is considering issuing further practical compliance guidance.

Commissioner of Taxation v Shaw [2026] FCA 197 (Published 13 May 2026)

5.

ATO finalises rental property guidance: TR 2026/1

The ATO has released Taxation Ruling TR 2026/1 Income tax: rental property income and deductions for individuals who are not in business (TR 2026/1), finalising its position on certain rental income and deductions.

TR 2026/1 applies broadly to long-term rentals, short-term letting arrangements (including via online sharing platforms), and mixed-use properties.

Holiday homes and s 2650

Section 26-50 of the ITAA 1997 denies deductions for losses or outgoings to the extent they relate to a "leisure facility", unless an exception applies.

Under TR 2026/1:

• a holiday home may be classified as a “leisure facility” where it is used or held mainly for private or recreational purposes; and
• in that case, section 2650 may apply to deny deductions for ownership and holding costs (such as interest, rates and maintenance).

An exception applies where, at all times during the income year, the holiday home is used (or held for use) mainly to produce assessable income in the nature of rent, lease premiums, licence fees or similar charges.  This requires not merely a quantitative time-based analysis but a qualitative evaluation of all relevant facts and circumstances, including availability during peak seasonal demand periods..

Deductibility and apportionment

TR 2026/1 confirms that:

• deductions are only available to the extent expenses are incurred in producing income;
• private or domestic use must be excluded; and
• apportionment on a fair and reasonable basis is required for mixed use properties.

TR 2026/1 also clarifies that the availability of deductions depends on actual use and purpose, and the mere fact that a holiday home is advertised for rent is not sufficient, of itself, to establish that the property is used (or held for use) mainly to produce assessable income.

Transitional compliance approach

The Commissioner will not devote compliance resources to reviewing whether section 26-50 applies to expenses incurred in relation to holiday homes that are rental properties, if the expenses are incurred before 1 July 2026.

Date of effect

TR 2026/1 applies to years of income commencing both before and after its date of issue, subject to the transitional compliance approach.

TR 2026/1 Income tax: rental property income and deductions for individuals who are not in business

6.

ATO releases Decision Impact Statement on Baya decision – assessing a genuine redundancy

The ATO has issued a DIS following the Full Federal Court’s decision in Federal Commissioner of Taxation v Baya Casal [2026] FCAFC 11 (Baya), confirming that a material reduction in hours and remuneration is a relevant factor in assessing whether a redundancy is genuine.

The case involved an employee who declined redeployment into alternative roles offering fewer hours and lower pay, instead receiving a redundancy payment of 13 weeks’ pay.  The Commissioner contended that no "genuine redundancy" arose because work remained available.

The Full Court rejected the Commissioner's argument, determining that whether a position is genuinely redundant is a question of fact and degree requiring a holistic, evaluative assessment.  A reduction in hours and remuneration may be a relevant factor, though not determinative.

In the DIS, the ATO accepted that a reduction in hours may support a finding of "genuine redundancy", but emphasised that no brightline thresholds apply.  In particular, the Federal Court did not endorse any fixed percentage reduction (such as 20-40%) as a sufficient threshold. 

The DIS confirms that the ATO will continue to apply a fact specific approach, and that a purely mathematical test will not be adopted.  Accordingly, the significance of any reduction will depend on the nature of the role and surrounding circumstances.

Commissioner of Taxation v Baya Casal [2026] FCAFC 11 (Published 27 May 2026)

7.

Draft update: cents per kilometre rate increases to 91 cents

The ATO has released draft legislative instrument Income Tax Assessment (Cents per Kilometre Deduction Rate for Car Expenses) Determination 2026, proposing an increase to the cents per kilometre rate to 91 cents for the 2026-27 income year.

The new rate of 91 cents per kilometre comprises:

• a base rate of 89 cents per kilometre; and
• a temporary one-off uplift of 2 cents for 2026-27.

From later income years, indexation will be applied to the 89cent base rate (i.e. the 2 cent uplift will not carry forward).

Once finalised, the Instrument will apply from 1 July 2026.

LI 2026/D12 | Legal database

8.

ATO updates PS LA 2006/17 — expanded guidance on SMSF trustee disqualification

The ATO has updated Practice Statement Law Administration PS LA 2006/17 Self-managed superannuation funds - disqualification of individuals to prohibit them from acting as a trustee of a self-managed superannuation fund (PS LA 2006/17), with effect from 21 May 2026, providing expanded and modernised guidance on on the exercise of the Commissioner’s powers to disqualify individuals from acting as SMSF trustees.

Relevantly, PS LA 2006/17:

• clarifies that disqualification is primarily directed at managing future compliance risk and protecting the integrity of the superannuation system;
• confirms that an individual may be disqualified under both the contravention and fit and proper person limbs; and
• expands the disqualification process, including allowing individuals to wind up an SMSF or appoint an RSE licensee prior to disqualification.

PS LA 2006/17 significantly broadens the factors relevant to assessing contraventions, including the nature, number and seriousness of breaches, risks to fund assets (such as depletion or illiquidity), repeated noncompliance, personal use of assets, and arm’s length and commercial dealing considerations.

The ATO has also strengthened its focus on future compliance risk, with greater emphasis on a trustee’s willingness to comply and any evidence of behavioural change.

The fit and proper person assessment has also been expanded to include factors such as understanding of trustee obligations, prior SIS Act contraventions, independence, remorse, continued acting while disqualified, and whether the individual acted in accordance with legal duties rather than personal convenience.

Overall, these updates reflect a more structured and risk focused approach to trustee disqualification and are likely to inform both ATO compliance activity and dispute outcomes.

PS LA 2006/17 Self-managed superannuation funds - disqualification of individuals to prohibit them from acting as a trustee of a self-managed superannuation fund