The tax changes the Australian government is proposing

Confirmed legislation and plans under consideration include:

Personal Income Tax Cuts

Staged Reductions for Low-Income Bracket

• As passed in the 2025‑26 Federal Budget, the marginal tax rate for taxable income between $18,201 and $45,000 will be reduced:

  • From 16% to 15% starting 1 July 2026;

  • Further down to 14% on 1 July 2027.

These cuts aim to alleviate cost-of-living pressures and roll back bracket creep.

Instant Tax Deduction for Work-Related Expenses

• From 1 July 2026, a $1,000 instant deduction for work-related expenses will be introduced, without needing receipts—benefitting approximately six million workers who usually claim less than that.

Superannuation & Retirement Tax Measures

Higher Tax on Excessive Balances

• The government is proposing a 15% extra tax on earnings, above unrealised gains from super balances exceeding $3 million. If enacted, this would begin 1 July 2025.

• Critics argue this could undermine the superannuation system and deter retirees; proponents say it improves intergenerational fairness.

Corporate Tax Reform

• The Productivity Commission, supported by Treasurer Jim Chalmers, recommends lowering corporate tax rates:

  • From 25% to 20% for companies earning under A$50 million;

  • From 30% to 20% for companies with earnings between A$50 million and A$1 billion.

This is intended to attract investment and bolster economic resilience amid global uncertainty.

Road-User Charge for Electric Vehicles

• The government is proposing a distance-based road-user charge, initially targeting EVs and possibly hybrids. Costs are estimated at $300–$400 per year, with potential scaling to include trucks and replacement of fuel excise.

Some EV advocates argue this could slow adoption and conflict with climate targets.

Broader Tax Reform Proposals

Economist’s Systemic Overhaul

• Economist Chris Murphy’s highly influential model proposes:

  • A $2,700 income tax cut per average worker,

  • Financing this via GST broadening, replacing stamp duties with a land tax, and shifting corporate tax towards taxing super profits (economic rents).

  • Expected to lift GDP by 6%, business investment by 11%, and housing supply by 8%, though it could raise household inequality.

Productivity Commission’s Recommendations

• Calls for:

  • A carbon price;

  • A new 5% net cashflow tax on large firms to encourage investment and reduce burdens on small businesses;

  • Broader deregulation and tax simplification.

Negative Gearing and CGT Reforms

• The government hasn’t ruled out reforming negative gearing and capital gains tax concessions—possibly capping benefits to one property—as part of fairness discussions, though no decisions have been made. Housing supply concerns remain prominent.
  
  

Summary Table of Key Proposals