The Senate Economics Legislation Committee's two-day public inquiry into the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026[1]Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and a related bill — Parliament of Australia“Committee reporting date June 19, 2026; hearings scheduled June 15–16, 2026” concluded in Sydney on Tuesday, with the committee due to report by June 22[1]Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and a related bill — Parliament of Australia“Committee reporting date June 19, 2026; hearings scheduled June 15–16, 2026” when the Senate reconvenes. If the testimony entered into the record over those two days means anything, the committee's conclusion should be unambiguous: the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026[2]Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 — Parliament of Australia“Bill text as introduced and passed by the House of Representatives” cannot and should not pass in its current form.
This is not an argument against tax reform. It is a recognition that two days of compressed scrutiny — over a bill with far-reaching consequences for every Australian property owner, business operator, farmer, and retiree — has confirmed not one but several serious structural failures that Treasurer Jim Chalmers still insists the Senate can wave through by July 2.
The most serious of those failures is the SMSF loophole. And unlike many of the problems catalogued across 48 hours of testimony, this one grows more dangerous the longer the bill sits unamended.
What is the SMSF loophole, and why can't the government close it in time?
By exempting self-managed superannuation funds from both the negative gearing changes and the new CGT indexation regime, the bill has made SMSFs the most tax-effective vehicle in Australia for purchasing established residential property. The intention was to limit disruption to retirement savings. The unintended consequence is a structural tax incentive that the property market has already identified and acted upon.
Greens treasury spokesman Senator Nick McKim laid out the arithmetic at the Day 1 hearing in Canberra on June 15. "Self-managed super funds pay an effective tax rate of 10 per cent on capital gains. They're protected from the negative gearing changes in this legislation, and they can still, or they will still be able to borrow to buy existing residential properties, because of the fact that the limited recourse borrowing arrangements will remain in place," McKim told the committee.[7]Greens take aim at SMSFs in Senate CGT inquiry“McKim: SMSFs pay 10% CGT, protected from negative gearing changes, can still borrow via LRBAs; flood of spruikers” He noted "a flood of spruikers online advertising SMSFs, SMSF the budget loophole, why SMSF is now king."[7]Greens take aim at SMSFs in Senate CGT inquiry“McKim: SMSFs pay 10% CGT, protected from negative gearing changes, can still borrow via LRBAs; flood of spruikers”
Under the bill as drafted, an individual buying an established investment property in their personal name will face a minimum 30% tax on real capital gains from July 1, 2027, and will lose negative gearing deductions on any new acquisition. The same individual, purchasing through an SMSF via a limited recourse borrowing arrangement (LRBA), pays 10%[7]Greens take aim at SMSFs in Senate CGT inquiry“McKim: SMSFs pay 10% CGT, protected from negative gearing changes, can still borrow via LRBAs; flood of spruikers” on gains and retains effective deductibility of losses against fund income. Melbourne Law School Associate Professor Kathryn James had also flagged this at Day 1: superannuation funds retaining their existing one-third CGT discount — exempt from the new regime — created an emerging incentive for property investors to use SMSFs as a tax shelter[3]Senate inquiry into controversial CGT, negative gearing reforms kicks off in Canberra“Day 1 testimony including National Housing Supply Council's 35,000 fewer homes, COSBOA's Matthew Addison, Kathryn James on SMSF loophole, Greg Jericho acknowledging no regression analysis”. "There will need to be a discussion had around the use of superannuation as a tax-minimisation vehicle," she said.
On Day 2 in Sydney, the Financial Advice Association Australia (FAAA) confirmed the loophole and added a dimension that academic commentary had not captured: the conduct risk from unlicensed operators. FAAA representative Andrea Forbes told the committee the SMSF incentive was unintended but had already produced a surge in misconduct risk from property brokers who are not licensed and may not act in consumers' best interests[4]CGT reforms carry serious SMSF lending risk: Budget inquiry day two“FAAA's Andrea Forbes on SMSF misconduct risk, unlicensed operators; adviser workforce down 48%; Greco 'black mark'; Ogden three amendments; Caine REIA housing affordability”. "These schemes can be very high-risk," Forbes said. "If you are investing your superannuation in a single property and you're highly geared, then it doesn't take much to go wrong for that strategy to fall over."
The FAAA urged the committee to consider five specific remedies: higher SMSF establishment standards including mandatory online training; limitations on limited recourse borrowing arrangements; a prohibition on SMSFs investing in property development; restrictions on SMSF property advertising; and stronger diversification guidance[6]FAAA urges SMSF property investment prohibitions“FAAA five recommendations including LRBA limits, SMSF property dev prohibition, and advertising restrictions; 'uplift in advertising on social media suggesting SMSF property investment is the new big opportunity'”.
None of those remedies can be incorporated into the current bill before the July 2 deadline. The government has signaled a second technical bill will arrive later in 2026 to address sector-specific carve-outs[11]Inquiry lays bare housing crisis as tax reform bill reaches Senate“Business Council of Australia calls for mandatory post-implementation review within three years; government to introduce second technical bill later in 2026” and related issues. But the Senate is being asked to pass the first bill — the one that creates the SMSF incentive — before the corrective legislation is even drafted. Tax distortions introduced with this architecture have a poor record of being reversed.
Why is the advice workforce too depleted to protect retirees?
The FAAA's second contribution at the Sydney hearing was equally alarming. Licensed financial adviser numbers have roughly halved since the end of 2018, falling from approximately 28,900 to just over 15,100 — a decline of approximately 48 per cent[4]CGT reforms carry serious SMSF lending risk: Budget inquiry day two“FAAA's Andrea Forbes on SMSF misconduct risk, unlicensed operators; adviser workforce down 48%; Greco 'black mark'; Ogden three amendments; Caine REIA housing affordability”, the association told the committee. Approximately 700 Australians are retiring every day, and this cohort needs professional guidance on how sweeping CGT and negative gearing changes interact with their superannuation, estate plans, and retirement income strategies.
"We're concerned that unadvised Australians will be more vulnerable to scams, fraud, and unlicensed influences as they seek to navigate these very wide-ranging tax reforms," Forbes told the committee. "Members are dealing with consumers literally every day about the changes and the potential implications for them, everything from remodelling their retirement planning to talking about their estate planning, whether that should be delayed."
This is the government's accountability failure in miniature. Having denied Australians meaningful public consultation before introducing the bill — no consultation papers were released, no exposure draft legislation was published, and no formal opportunity was provided to the public before introduction[14]Australian taxpayers deserve a say on tax changes, says The Tax Institute“No consultation papers released, no exposure draft, no formal public opportunity before introduction; Senate committee is the only formal avenue”, according to the Tax Institute[14]Australian taxpayers deserve a say on tax changes, says The Tax Institute“No consultation papers released, no exposure draft, no formal public opportunity before introduction; Senate committee is the only formal avenue” — the government is now relying on a professional advice sector depleted by nearly half over six years to absorb the guidance burden of the most sweeping tax reform in two decades. The supply of licensed advice cannot meet the demand, and the FAAA warned the shortfall will be filled by unlicensed operators.
What makes the Senate's political geometry unworkable?
Then there is the political arithmetic — and it is as bleak as the substantive analysis.
Labor's 30 Senate seats are insufficient to pass the bill alone. The Coalition opposes the CGT and negative gearing elements. The 11 Greens senators hold the balance of power — and after two days of testimony, Senator McKim's terms are plain.
At the Day 1 Canberra hearing, McKim marshalled witness after witness to argue that the bill's grandfathering provisions — which protect existing investors from the new negative gearing restrictions — should be scrapped entirely. He noted approximately 1.7 million properties owned by people with two or more investment properties[5]CGT changes: Greens hint they want to scrap grandfathering in Labor's Budget tax changes“McKim questioning about 1.7 million properties, Eslake on grandfathering privileges birth order, committee tabling report June 22” and asked Australia Institute economist Matt Grudnoff whether removing those protections would force investors to sell into the first-home buyer market. Grudnoff agreed it would. Independent economist Saul Eslake told the hearing he opposed grandfathering in principle — "it almost by definition privileges people on the basis of birth order"[5]CGT changes: Greens hint they want to scrap grandfathering in Labor's Budget tax changes“McKim questioning about 1.7 million properties, Eslake on grandfathering privileges birth order, committee tabling report June 22” — but accepted it as a political necessity. McKim's questioning made clear the Greens do not share that acceptance.
McKim also signaled the Greens intend to push for constraints on the bill's ministerial discretion provisions — clauses that allow the Treasurer to reapply the 50% CGT discount or unrestricted negative gearing to any asset class by legislative instrument, without returning to Parliament.
These demands are structurally incompatible with the position of every professional body that appeared before the committee. CPA Australia recommended the bill be substantially improved or deferred, warning it was technically deficient[8]Unintended consequences: how the CGT, negative gearing changes impact SMSFs“CPA Australia recommends bill be substantially improved or deferred; Jenny Wong: 'This is not a case of resistance to reform — it is a case of reform that could be done better'”. CPA Australia Tax Lead Jenny Wong put it plainly: "This is not a case of resistance to reform — it is a case of reform that could be done better."[8]Unintended consequences: how the CGT, negative gearing changes impact SMSFs“CPA Australia recommends bill be substantially improved or deferred; Jenny Wong: 'This is not a case of resistance to reform — it is a case of reform that could be done better'” The Tax Institute recommended the bill not pass in its current form. COSBOA Chair Matthew Addison declared "Tax reform should encourage ambition, investment, and growth. Our concern is that, as currently drafted, these measures risk doing the opposite."[3]Senate inquiry into controversial CGT, negative gearing reforms kicks off in Canberra“Day 1 testimony including National Housing Supply Council's 35,000 fewer homes, COSBOA's Matthew Addison, Kathryn James on SMSF loophole, Greg Jericho acknowledging no regression analysis”
The Greens want the bill made more radical. The professional community wants it made less so, or deferred entirely. The Coalition wants it defeated. There is no version of the bill as currently bundled that satisfies all three.
This is not a case of resistance to reform — it is a case of reform that could be done better.
Jenny Wong, Tax Lead, CPA Australia, Senate Economics Legislation Committee, June 2026
Can the government meet its own compliance timeline?
Institute of Public Accountants Senior Tax Adviser Tony Greco delivered the Day 2 Sydney hearing's most comprehensive indictment of the bill's practical architecture. The CGT changes carry "a black mark" against the three core principles of sound tax law — fairness, efficiency, and simplicity — and Treasury had grossly underestimated compliance costs[4]CGT reforms carry serious SMSF lending risk: Budget inquiry day two“FAAA's Andrea Forbes on SMSF misconduct risk, unlicensed operators; adviser workforce down 48%; Greco 'black mark'; Ogden three amendments; Caine REIA housing affordability”, he told the committee. Treasury put annual compliance costs at $88.4 million; valuations for illiquid assets alone would far exceed that figure[9]Small business, tech sector CGT concerns aired at Senate hearing“Day 2 Sydney hearing: Prof Stewart 'no doubt' compliance costs; Greco on incomprehensibility; Cappuccio on postponed business sales”, Greco said. The resulting CGT regime, he added, was "incomprehensible for an individual."[9]Small business, tech sector CGT concerns aired at Senate hearing“Day 2 Sydney hearing: Prof Stewart 'no doubt' compliance costs; Greco on incomprehensibility; Cappuccio on postponed business sales”
The compliance cost gap
- $88.4m/year — Treasury's estimated annual compliance cost
- $295–542m/year — CPA Australia's estimated annual compliance cost (three to six times Treasury's figure)
- $675–825m — Estimated one-off transitional valuation cost (CPA Australia)
- Nine — Unwritten ministerial instruments required for the bill to function (CPA Australia)
- 35,000 — Fewer new homes projected over the decade (National Housing Supply and Affordability Council)
- 15,100 — Licensed financial advisers in Australia today (~48% decline since end of 2018)
Chartered Accountants ANZ Executive Damian Ogden called for three specific technical amendments, including changes to capital loss usage ordering and expanded access to indexation[4]CGT reforms carry serious SMSF lending risk: Budget inquiry day two“FAAA's Andrea Forbes on SMSF misconduct risk, unlicensed operators; adviser workforce down 48%; Greco 'black mark'; Ogden three amendments; Caine REIA housing affordability”, arguing the bill introduced unnecessary complexity through new gain and loss classifications. Absent those amendments, the compliance burden falls disproportionately on individual taxpayers without institutional advice — the very Australians the reform is meant to help.
The core compliance requirement is a split valuation: every taxpayer holding a capital asset as of July 1, 2027 must separate accumulated gains into pre- and post-commencement periods. For listed shares, the exercise is mechanical. For established residential property, it requires a formal market appraisal. For private business assets — including goodwill — it is a professionally contested judgment whose reliability will be immediately litigated. Greco described the resulting CGT as "incomprehensible for an individual."[9]Small business, tech sector CGT concerns aired at Senate hearing“Day 2 Sydney hearing: Prof Stewart 'no doubt' compliance costs; Greco on incomprehensibility; Cappuccio on postponed business sales”
What is the collateral damage for farmers and startup founders?
The bill's CGT provisions apply to all asset classes — business goodwill, farmland, shares, and intellectual property — not merely residential property. The government has assessed its consequences primarily through a housing lens. That truncated analysis is already producing alarm in sectors the inquiry barely had time to examine.
The National Farmers' Federation urged the committee to ensure CGT changes do not undermine farm business viability, particularly at intergenerational succession points[10]Farmers must not be overlooked in tax bill inquiry“McIntyre: 'Any changes to CGT must support the ability of farm businesses to grow, adapt and pass on to the next generation'”. NFF President Hamish McIntyre said the small business CGT concession thresholds — set almost two decades ago, before rural land values soared — now exclude many highly productive family farms. "Any changes to CGT must support the ability of farm businesses to grow, adapt and pass on to the next generation," McIntyre said.[10]Farmers must not be overlooked in tax bill inquiry“McIntyre: 'Any changes to CGT must support the ability of farm businesses to grow, adapt and pass on to the next generation'”
COSBOA CEO Skye Cappuccio raised the equivalent problem for startup founders. The maximum marginal tax rate for founders with near-zero cost bases would effectively double to nearly 47 per cent upon the sale of their business[13]Fight and flight: tax inquiry fuming just a smokescreen“Maximum marginal tax rate for startup founders with negligible initial capital base would double to nearly 47%; Prof Stewart on startup relocation concerns” — an impost applying regardless of whether the business exports, employs, or contributes to national productivity. Some COSBOA network members had already begun postponing planned business sales pending legislative clarity[9]Small business, tech sector CGT concerns aired at Senate hearing“Day 2 Sydney hearing: Prof Stewart 'no doubt' compliance costs; Greco on incomprehensibility; Cappuccio on postponed business sales”.
Melbourne Law School Professor Miranda Stewart, defending the reform's broad direction at Day 2, dismissed concerns that founders would relocate offshore, saying those seeking zero CGT "have to go and live in Dubai, live in the US in order to achieve that"[13]Fight and flight: tax inquiry fuming just a smokescreen“Maximum marginal tax rate for startup founders with negligible initial capital base would double to nearly 47%; Prof Stewart on startup relocation concerns” and that empirical evidence shows most people do not move in response to tax changes. Professor Stewart is right that most founders will not emigrate. She is less helpful on whether they will defer sale, restructure into superannuation, or redirect investment into asset classes retaining more favourable CGT treatment — none of which require a passport.
REIA President Jacob Caine put the housing supply contradiction most starkly: "Housing affordability will not be solved by reshaping tax settings in a way that reduces rental investment, adds uncertainty, and risks slowing the delivery of new homes."[4]CGT reforms carry serious SMSF lending risk: Budget inquiry day two“FAAA's Andrea Forbes on SMSF misconduct risk, unlicensed operators; adviser workforce down 48%; Greco 'black mark'; Ogden three amendments; Caine REIA housing affordability”
Where is the modelling gap nobody can fill?
The inquiry's deepest accountability failure was not its shortened format. It was the absence of independent modelling capable of adjudicating between the government's projections and the evidence produced by its own independent agencies.
In his second-reading speech on May 28[12]Second reading speech, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026“Chalmers: '75,000 more homeowners entering the housing market over the next decade'”, Treasurer Chalmers told Parliament the bill would produce "75,000[12]Second reading speech, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026“Chalmers: '75,000 more homeowners entering the housing market over the next decade'” more homeowners entering the housing market over the next decade." National Housing Supply and Affordability Council Chair Susan Lloyd-Hurwitz — the government's own independent housing adviser — told the Day 1 hearing the reforms could result in approximately 35,000 fewer new homes being built over the same period[3]Senate inquiry into controversial CGT, negative gearing reforms kicks off in Canberra“Day 1 testimony including National Housing Supply Council's 35,000 fewer homes, COSBOA's Matthew Addison, Kathryn James on SMSF loophole, Greg Jericho acknowledging no regression analysis”. Those figures are not merely in tension. They are directionally opposed.
When Liberal Senator Claire Chandler pressed Australia Institute Chief Economist Greg Jericho for regression analysis isolating the CGT discount's causal role in house price growth, Jericho acknowledged that no such analysis had been conducted[3]Senate inquiry into controversial CGT, negative gearing reforms kicks off in Canberra“Day 1 testimony including National Housing Supply Council's 35,000 fewer homes, COSBOA's Matthew Addison, Kathryn James on SMSF loophole, Greg Jericho acknowledging no regression analysis”. The foundational political claim for the bill rests on causal assumptions that even its advocates concede have not been formally tested.
The Business Council of Australia called for a mandatory, fully independent and transparent post-implementation review within three years[11]Inquiry lays bare housing crisis as tax reform bill reaches Senate“Business Council of Australia calls for mandatory post-implementation review within three years; government to introduce second technical bill later in 2026” because the government has not assessed the bill's consequences for business investment beyond the property sector. That is a striking request: a peak industry body asking the government to build a formal accountability mechanism into a law before it has passed — because neither industry nor the committee has enough data to evaluate it properly.
The legislative sprint
- May 12, 2026 — Budget night; CGT and negative gearing changes announced
- May 28, 2026 — Bill introduced to House of Representatives; referred to Senate Economics Legislation Committee
- June 4, 2026 — Bill passed House without amendment after 16 hours of debate and 21 divisions
- June 9, 2026 — Submissions to Senate committee closed
- June 15, 2026 — Day 1 hearings, Canberra; Greens signal demand for retrospective changes; SMSF loophole identified
- June 16, 2026 — Day 2 hearings, Sydney; FAAA confirms SMSF conduct risk and adviser workforce crisis
- June 19, 2026 — Committee formal reporting deadline
- June 22, 2026 — Senate reconvenes; committee report to be tabled
- July 2, 2026 — Government's target date for Senate passage
What should the Senate do?
The Senate has a choice that is clearer than the government or the Greens wish to acknowledge.
It can split the bill. The $1,000 standard deduction and $250 Working Australians Tax Offset are uncontroversial, technically straightforward, and supported by the Coalition and most crossbenchers. Independent Senator David Pocock has already called for this approach, arguing the government is "actively avoiding scrutiny" by bundling worker tax cuts with contested structural changes. The government's refusal to split is an admission that the CGT and negative gearing provisions cannot pass on their own merits.
Alternatively, the Senate can defer the structural provisions and demand a proper inquiry: with adequate time, exposure draft legislation, and independent modelling capable of confirming or refuting the government's projections. No consultation papers were released, no exposure draft was published, and no formal public opportunity was provided before introduction[14]Australian taxpayers deserve a say on tax changes, says The Tax Institute“No consultation papers released, no exposure draft, no formal public opportunity before introduction; Senate committee is the only formal avenue”, the Tax Institute noted. A bill that emerges from genuine consultation will carry technical clarity that the professional community currently cannot provide to its clients, will be harder for a future government to unwind, and will not create a structural tax loophole as a byproduct.
What the Senate must not do is pass a bill that creates an SMSF tax shelter it cannot yet close; imposes compliance costs it cannot accurately estimate; deploys its most contested structural changes inside a parcel designed to make voting against them look like voting against worker tax cuts; and presents the crossbench with an ultimatum between no reform at all and reform so rushed it is already generating the distortions it was designed to eliminate.
The two days of scrutiny were never going to be sufficient. The committee report due June 22 should say so — and the Senate should act on it.