‘Simpler’ tax reform resulting in major confusion

The Treasury Laws Amendment (Tax Reform No.1) Bill 2026 and Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026 will introduce reforms such as delivering a new Working Australians Tax Offset (WATO) to provide a permanent annual tax offset of up to $250 to every working Australian taxpayer.

The aim is to provide cost-of-living relief for workers, and due to the fact that it is a tax offset rather than a deduction, eligible workers receive the same dollar-value benefit regardless of their tax bracket.

However, CPA Australia warned that the government’s tax reform legislation risks creating a more complex and uncertain system, after the Treasury Laws Amendment Bill 2026 was introduced into parliament recently.

The Australian accounting body said while the bill delivered the core elements of the federal budget’s tax package – including changes to CGT, negative gearing, the WATO and the proposed standard deduction – critical components were unresolved.

Whilst such issues are indeed being addressed, many argue that certain complications are being left out.

CPA Australia tax lead Jenny Wong warned that the most structurally significant measure for private business and family wealth had been deferred.

“This Bill is consistent with the CGT and negative gearing changes announced in the Budget, however the proposed minimum tax on discretionary trusts has been split into a separate Bill, leaving a major gap in the system,” Wong said.

With the reform being enforced in stages, CPA Australia warned that this staggered implementation risks undermining investment confidence.

Wong added: “Implementing reform in tranches creates a two-tier system – where some Australians know where they stand and others do not. That uncertainty has real consequences for investment decisions being made right now.”

Ultimately, the bill does not include the planned 30 per cent minimum tax on all discretionary trusts until 2028. This intermittent gap enables high-net-wealth individuals and investors to park their capital in fixed trusts and discretionary testamentary trusts, thus creating a sense of uncertainty surrounding the new reform.

“The Government has committed to making tax time simpler, but this package does the opposite,” Wong said.

Amidst this confusion, finance and tax experts are outlining indications for regular Australians and business owners.

Gavin Quayle, former ATO director and current principal at Hilltop Tax Advisory, broke down the CGT bill and highlighted some integral aspects to keep in mind.

Regarding the double tax, Quayle said: “Confirm how the incoming country taxes you and your interests, including whether it has a treaty with Australia and how taxing rights are allocated.”

“This is particularly the case for associated companies/trusts which may get caught up in the tax net of the incoming country as well as in Australia,” he added.

Moreover, Quayle noted a warning for business owners who may opt to expand their business to the US.

“The key tax risk that comes as a surprise to many founders is that a change of tax residency causes a deemed disposal of all their assets at market value except those that are Australian real property.”

“This will mean individual founders will need to pay tax to the ATO in their 'final' tax return, even though they haven't sold any of their assets. This creates an unfunded tax liability problem.”

“The existing concessions in the tax law for start-ups – such as share option schemes, small business concessions and R&D tax credit rules – are clunky and difficult to access, making them either out of reach for many or only accessible after incurring hefty adviser fees.”

“So why bother taking risks in starting a business in Australia when the Government does not create the business settings that embrace you, but instead will happily feed off the start-up teat if you’re successful,” Quayle said.

CPA Australia encouraged the government to reconsider its approach toward the reform implementation.

“We urge the Government to work with us and other stakeholders to get this right. Tax changes of this scale deserve genuine engagement, proper consultation and a complete legislative package that gives Australian and the market the certainty they need. We look forward to consulting with the Government on the next stage of CGT changes.”