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The Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 finally passed both Houses of Parliament on Wednesday (19 August), after the government and the opposition agreed to a range of changes to the bill.
The second tranche of tax reforms from the budget 2026 has now passed, after the government secured support from the opposition in exchange for NDIS reform support.
The bill had originally included the controversial ‘widow tax’, which unintentionally set out that if a negatively geared asset purchased before budget night was jointly owned – but the asset was fully transferred to one co‑owner due to death or divorce – that transfer would be treated as an ownership change, causing the concessions to vanish.
Earlier this month, the government confirmed draft changes for the Tranche 2 bill, which would “preserve existing eligibility for negative gearing or treatment as a new build in certain circumstances, including for residential dwellings acquired from a spouse as a result of inheritance or relationship breakdown”.
The Tranche 2 material made clear that these spouses would still be protected so long as they genuinely acquired the property through death or relationship breakdown.
The bill also includes permanently extending the $20,000 instant asset write-off into law from 1 July 2026.
It also enables corporate tax entities that are not significant global entities to carry back a tax loss in an income year and apply it against tax paid in either or both of the previous two income years to receive a tax offset, among other changes.
Final changes clear Parliament
Speaking on the widow tax in the House of Representatives earlier in the week, the Liberal Party Leader Angus Taylor MP said: “There will be no widows tax. And not because Labor wanted it gone. But because the Coalition forced Labor to axe it.
“It has been 98 days since Labor announced its widow tax. For 98 days, the Government has been warned about the harm it would cause and promised to fix it.
“And for 98 days, Australians have been left waiting. Every day of delay has created more uncertainty for Australians facing some of the most difficult circumstances in their life.
“Yesterday, I wrote to the PM and made our position crystal clear.
“We would not support the Government’s NDIS changes until Labor repealed its cruel widow tax.
“He caved.
“After 98 days of delay, a tax that should never have been introduced in the first place will be axed. Widows, divorcees and victims of domestic violence should not be forced to pay a financial penalty at some of the most difficult moments of their lives. They certainly shouldn’t have to pay for Labor’s incompetence.”
Given the support of the opposition, the bill passed Senate on Wednesday and finally passed both houses.
Speaking of the passage of the bill, Treasurer Jim Chalmers MP commented that the legislation provides “certainty for people who acquire an interest in property as a result of inheritance or relationship breakdown”.
“The Bill builds on the legislation to reform negative gearing and capital gains tax passed in June,” he said on Wednesday.
“It ensures a property owned on Budget night will retain access to negative gearing in certain circumstances.
“The provisions in the Bill ensure an individual can retain this treatment for an ownership interest in a property where: the property was acquired from a spouse through an inheritance or relationship breakdown; or someone inherits part or all of a property in which they already had an ownership share.
“They also ensure new builds will retain access to negative gearing and concessional capital gains tax treatment in the same circumstances.”
Support for businesses
Chalmers also outlined that the tax reforms would also “deliver billions of dollars in support for business to encourage productive investment and sensible risk taking”.
“This is great news for small businesses across the country and will help drive investment, innovation and resilience across the economy,” Chalmers said.
He flagged that the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 reintroduces loss carry back for companies for tax years starting on or after 1 July 2026, so that eligible companies can offset a loss against tax paid up to two years earlier, generating a refundable tax offset.
“This will deliver more help to 85,000 mostly small businesses, supporting productive investment and sensible risk‑taking and providing timely cash flow support to bolster resilience as well,” he said.
Touching on the instant asset write-off, Chalmers said: “The Albanese government has now delivered certainty to small businesses who have for too long had to wait to see if the Parliament would extend the instant asset write-off each year.
“All 2.7 million active small businesses with turnover of less than $10 million stand to benefit.
“This will reduce compliance costs for small business by around $32 million per year and provide the certainty small businesses need to invest with confidence.
“Our reforms are all about making our economy work in the interests of more Australians, businesses and future generations, delivering more support for small business, more tax cuts for workers, and making it easier for Australians to buy their first home.”
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