Income Tax Rates Amendment (Tax Reform No. 1) Act 2026
No. 50, 2026
An Act to amend the Income Tax Rates Act 1986, and for related purposes
Contents
1 Short title
2 Commencement
3 Schedules
Schedule 1—Amendments
Income Tax Rates Act 1986
Income Tax Rates Amendment (Tax Reform No. 1) Act 2026
No. 50, 2026
An Act to amend the Income Tax Rates Act 1986, and for related purposes
[Assented to 26 June 2026]
The Parliament of Australia enacts:
1 Short title
This Act is the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026.
2 Commencement
(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.
Commencement information |
Column 1 | Column 2 | Column 3 |
Provisions | Commencement | Date/Details |
1. The whole of this Act | The first 1 January, 1 April, 1 July or 1 October to occur after the day this Act receives the Royal Assent. | 1 July 2026 |
Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.
(2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.
3 Schedules
Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.
Schedule 1—Amendments
Income Tax Rates Act 1986
1 After section 12
Insert:
12AA Rate of extra income tax on minimum tax capital gain
(1) This section sets the rate of extra income tax payable under subsection 119‑10(1) of the Income Tax Assessment Act 1997 on every dollar of a taxpayer’s minimum tax capital gain for a year of income.
(2) The rate is worked out using the formula:
(3) In this section:
minimum tax capital gain means the taxpayer’s minimum tax capital gain, within the meaning of the Income Tax Assessment Act 1997, in whole dollars.
minimum tax gap amount means the taxpayer’s minimum tax gap amount, within the meaning of the Income Tax Assessment Act 1997, in whole dollars.
[Minister’s second reading speech made in—
House of Representatives on 28 May 2026
Senate on 22 June 2026]
Overview
The Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 was enacted by the Parliament of Australia to amend the Income Tax Rates Act 1986, addressing the need for adjustments in income tax rates to ensure the tax system remains fair and effective. The act was assented to on 26 June 2026 and commenced on 1 July 2026, aiming to make targeted changes to income tax rates and related provisions to improve the efficiency and equity of the tax system. The policy objective is to provide a more balanced and progressive tax structure that supports economic growth while ensuring taxpayers contribute their fair share.
This act introduces specific amendments to the Income Tax Rates Act 1986, including the addition of a new section 12AA, which sets the rate of extra income tax on minimum tax capital gains. By specifying these amendments, the act ensures that the tax legislation remains responsive to economic conditions and policy goals, ultimately aiming to enhance the overall effectiveness of the tax system.
Scope and Application
The Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 applies to all taxpayers in Australia who are subject to the provisions of the Income Tax Assessment Act 1997. This includes individuals, companies, trusts, and other entities that are required to report income and pay income tax under Australian law. The Act seeks to amend the Income Tax Rates Act 1986 by introducing a new rate of extra income tax on minimum tax capital gains, which applies to all taxpayers who have a minimum tax capital gain for a year of income. The Act has a national reach, applying to taxpayers across the Commonwealth of Australia, and it extends to all income years commencing after the Royal Assent date of 26 June 2026, with a commencement date of 1 July 2026. The Act does not provide for any exclusions, exemptions, or thresholds within its primary text, although subordinate instruments may further define or extend the application of the new tax rate.
Key Provisions
The Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 introduces several amendments to the Income Tax Rates Act 1986. The main operative sections of this Act, specifically within Schedule 1, include the insertion of a new section 12AA, which details the rate of extra income tax on minimum tax capital gains. This new section outlines how the rate is calculated using a specific formula and defines key terms such as "minimum tax capital gain" and "minimum tax gap amount."
The Act imposes several obligations on taxpayers and entities governed by it. Firstly, taxpayers are required to accurately calculate their minimum tax capital gain and apply the prescribed rate of extra income tax as outlined in section 12AA. This involves understanding the formula provided and correctly identifying the relevant figures for their minimum tax gap amount. Additionally, taxpayers must ensure that they adhere to the specified commencement date, which is the first of January, April, July, or October following the Act's Royal Assent, in this case, 1 July 2026.
Breach of the obligations set forth in this Act can lead to significant consequences. The Act does not explicitly state the offences, penalties, or civil/criminal consequences for non-compliance, but given the nature of tax legislation, it is reasonable to infer that penalties for non-compliance with tax laws can include fines and potential imprisonment. The exact penalties would be governed by other relevant tax legislation, but they can be substantial, reflecting the seriousness with which tax compliance is treated under Australian law.