Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (49 of 2026)

Schedule 1   CGT adjustments

Part 2   Minimum rate of tax on capital gains

Income Tax Assessment Act 1997

58   After Division 118

Insert:

Division 119 - Minimum rate of tax on capital gains

Guide to Division 119

119-1 What this Division is about

If you are an individual who is an Australian resident, you may have to pay extra income tax relating to certain capital gains you make during an income year to ensure, before applying offsets, a rate of tax of 30% on so much of those gains as remains after applying section 119-5.

This Division sets out how to work out when extra income tax is payable and matters relating to the amount of that tax.

The requirement to pay extra income tax does not apply if you received certain payments during the income year.

Table of sections

Operative provisions

119-5 Your minimum tax capital gain for an income year

119-10 When extra income tax is payable on your minimum tax capital gain

119-15 Exception for recipients of certain payments

Operative provisions

119-5 Your minimum tax capital gain for an income year

(1) Your minimum tax capital gain (if any) for an income year is worked out as follows:

(a) first, total the amounts of *capital gains (if any) covered by subsection (2) that are remaining after applying step 6 of the method statement in subsection 102-5(1);

(b) next, reduce the result of paragraph (a) (but not below nil) by the total amount (if any) you are entitled to deduct, for the income year, under any of the following:

(i) Division 30 (about gifts or contributions);

(ii) Division 31 (about conservation covenants).

(2) This subsection covers a *capital gain you made during the income year, including because of section 115-215 (about attribution of trust gains to beneficiaries), if:

(a) the capital gain is:

(i) a *residential capital gain; or

(ii) a *non-residential capital gain; and

(b) section 115-102 (about new residential dwellings) does not apply to the capital gain; and

(c) section 115-125 (about affordable housing) does not apply to the capital gain.

119-10 When extra income tax is payable on your minimum tax capital gain

(1) You must pay extra income tax on your *minimum tax capital gain for an income year if:

(a) you are an individual; and

(b) you are an Australian resident at any time during the income year; and

(c) you have a *minimum tax gap amount for the income year.

Note: Section 12AA of the Income Tax Rates Act 1986 sets the rate at which you must pay extra income tax on your minimum tax capital gain. It does so in such a way that the extra income tax you must pay equals the minimum tax gap amount.

(2) Use this method statement to work out whether you have a minimum tax gap amount for the income year:

Method statement

Step 1. Multiply your *minimum tax capital gain for the income year by 30%.

Step 2. Work out your basic income tax liability for the income year under step 2 of the method statement in subsection 4-10(3), disregarding this Division.

Step 3. Work out what the amount at step 2 of this method statement would be if your taxable income for the income year were reduced (but not below nil) by the amount of your *minimum tax capital gain.

Step 4. Subtract the amount at step 3 from the amount at step 2.

Step 5. Subtract the amount at step 4 from the amount at step 1.

Step 6. Round the result down to the nearest whole dollar if the result is not already a number of whole dollars.

Step 7. If the result (as rounded) is more than nil, you have a minimum tax gap amount for the income year equal to that amount.

119-15 Exception for recipients of certain payments

(1) Section 119-10 does not apply to you if you receive, at any time during the income year, a payment covered by any of subsections (2) to (5).

Social Security Act 1991 payments

(2) This subsection covers the following payments under the Social Security Act 1991:

(a) an age pension under Part 2.2 of that Act;

(b) an austudy payment under Part 2.11A of that Act;

(c) a carer payment under Part 2.5 of that Act;

(d) a disability support pension under Part 2.3 of that Act;

(e) a double orphan pension under Part 2.20 of that Act;

(f) a jobseeker payment under Part 2.12 of that Act;

(g) parenting payment under Part 2.10 of that Act;

(h) special benefit under Part 2.15 of that Act;

(i) youth allowance under Part 2.11 of that Act.

Other social support payments

(3) This subsection covers the following payments:

(a) family tax benefit under the A New Tax System (Family Assistance) Act 1999;

(b) a stillborn baby payment under the A New Tax System (Family Assistance) Act 1999;

(c) farm household allowance under Part 2 of the Farm Household Support Act 2014;

(d) parental leave pay under the Paid Parental Leave Act 2010;

(e) a payment under the scheme known as the ABSTUDY scheme that includes an amount identified as living allowance.

Veterans' Entitlements Act 1986 payments

(4) This subsection covers the following payments under the Veterans' Entitlements Act 1986:

(a) an age service pension under Division 3 of Part III of that Act;

(b) a carer service pension under former Division 6 of Part III of that Act, as saved by clause 8 of Schedule 5 to that Act;

(c) income support supplement under Part IIIA of that Act;

(d) an invalidity service pension under Division 4 of Part III of that Act;

(e) a partner service pension under Division 5 of Part III of that Act;

(f) a veteran payment under section 45SB of that Act;

(g) a pension under Part II or IV of that Act at a rate determined under or by reference to subsection 30(1) of that Act;

(h) a pension under Part II or IV of that Act at a rate determined under or by reference to paragraph 30(2)(a) or (b) of that Act;

(i) a pension under Part II or IV of that Act at a rate applicable under section 23, 24 or 25 of that Act.

Military Rehabilitation and Compensation Act 2004 payments

(5) This subsection covers the following payments under the Military Rehabilitation and Compensation Act 2004:

(a) a Special Rate Disability Pension under Part 6 of Chapter 4 of that Act;

(b) the weekly amount mentioned in paragraph 234(1)(b) of that Act, including a reduced weekly amount because of a choice under section 236 of that Act;

(c) a lump sum mentioned in subsection 236(5) of that Act.