Chapter 1Introduction
1.1On 1 April 2026, the Senate referred the Treasury Laws Amendment (Delivering an Efficient and Trusted Tax System) Bill 2026 (the bill) to the Senate Economics Legislation Committee (the committee) for inquiry and report by 30 April 2026.
1.2The committee’s report on the bill contains two chapters:
Chapter 1—provides an overview of the bill and the inquiry process;
Chapter 2—considers inquiry participants’ evidence on the bill.
Purpose of the bill
1.3As outlined in Table 1.1, the bill’s four schedules each have as distinct purpose.
Table 1.1Summary of the bill's schedules
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1 | Removing the $2 threshold for deductions for gifts or contributions | Amends the Income Tax Assessment Act 1997 (ITAA 1997) so that donations to Deductable Gift Recipients of less than $2 are tax deductable. |
2 | Modernising tax administration systems | Amends the ITAA 1997 to streamline how closely held trustees report beneficiary tax file numbers to the Commissioner of Taxation. |
3 | Minor and technical amendments | Amends various acts to ensure Treasury portfolio legislation remains ‘fit for purpose’. |
4 | Exclusion of tobacco and gambling related activities from the Research and Development Tax Incentive | Amends the ITAA 1997 to exclude research and development activities related to gambling and tobacco from Research and Development Tax Incentive except for activities with the sole purpose of harm minimisation. |
Source: Explanatory Memorandum, pp. 1–2
Schedule 1—Removing the $2 threshold for deductions for gifts or contributions
1.4Schedule 1 of the bill would remove the requirement that a gift to a deductible gift recipient (DGR) should be valued at $2 or more to be tax deductible.
1.5The amendments are aimed at encouraging low value donations to DGRs. As the Explanatory Memorandum notes, ‘Lower value donations have become prevalent through point-of-sale roundup schemes with retailers and online vendors’.
1.6The removal of the $2 threshold was one of the recommendations (recommendation 4.1) made by the Productivity Commission in its May 2024 report, Future foundations for giving. The amendments would partially implement the government’s ‘Philanthropy – support to double philanthropic giving by 2030’ measure, as announced in the 2024–25 MYEFO.
1.7The amendments would apply to gifts made from 1 July 2024. The Explanatory Memorandum states that the retrospective application of the bill will benefit those who have donated to DGRs since 1 July 2024.
1.8A more detailed explanation of how the bill would amend the ITAA is provided in the Explanatory Memorandum.
Financial impact
1.9Schedule 1 is ‘estimated to result in a negligible decrease in receipts’. In 2023–24 and 2024–25, Schedule 1 is expected to have a nil financial impact. For 2025–26 to 2027–28, the Explanatory Memorandum reports the financial impact of Schedule 1 are ‘[n]ot zero but rounded to zero’.
Compliance costs
1.10The Explanatory Memorandum states Schedule 1 ‘will not materially change compliance costs for entities with DGR status’.
Schedule 2—Modernising tax administration systems
1.11Schedule 2 of the bill would streamline how trustees of closely held trusts report beneficiary tax file numbers (TFNs) to the Commissioner of Taxation and clarifies the Commissioner’s notification obligations where a TFN reported to the Commissioner is either incorrect or does not exist.
Beneficiary TFN reporting
1.12As set out in the Explanatory Memorandum, the amendments would require beneficiary TFNs to be reported:
…at the same time as the trust tax return is lodged for income years that the beneficiary is presently entitled to a share of income of the trust. This requirement replaces the obligation for trustees of closely held trusts to lodge a TFN report for the quarter in which a beneficiary quotes their TFN to the trustee. The amendments support pre-filling beneficiary income tax returns, helping to ensure the right amount of tax is being paid by trustees and beneficiaries.
1.13These changes would give effect to the law reform component of the ‘Modernising Tax Administration Systems’ measure announced in the 2024–25 MYEFO. Further detail on the context of the amendments is provided in the Explanatory Memorandum.
Commissioner’s notifications
1.14Schedule 2 will also clarify the Commissioner’s notification requirements when a TFN quoted to the trustee and reported to the Commissioner is incorrect.
1.15The amendments, which are described in more detail in the Explanatory Memorandum, are intended to assist ‘the trustee to report the beneficiary’s TFN where the beneficiary is presently entitled to a share of income of the trust in future income years’; and to help ensure that the trustee ‘can comply with their withholding obligations where required’.
Financial impact
1.16The Explanatory Memorandum states Schedule 2 ‘implements the law reform component of the broader measure 'Modernising Tax Administration Systems…[which] is estimated to increase receipts by $81.6 million over five years from 2023-24’. The estimated increase in receipts is outlined in Table 1.2.
Table 1.2Estimated increase in receipts from 2023-24
Source: Explanatory Memorandum, p. 3.
Compliance costs
1.17The Explanatory Memorandum states the measures are ‘expected to reduce compliance costs for trustees, beneficiaries and their registered agents’.
Schedule 3—Minor and technical amendments
1.18Schedule 3 consists of three parts that make minor and technical amendments to legislation.
1.19Part 1 amends the Treasury Laws Amendment (More Competition, Better Prices) Act 2022, correcting a typographical error, updating provisions related to unfair contract terms, and removing incorrect references to other legislation.
1.20Part 2 amends the SIS Act to:
…allow a Public Trustee that is acting for a client who has an SMSF to approve a person to be the trustee or the director of the trustee company of the client’s SMSF. The amendments also authorise that person to be remunerated for their services.
1.21The Explanatory Memorandum explains that the amendments in Part 2 are necessary:
…to address a gap in the provisions regarding legal personal representatives who are acting on behalf of a member of a SMSF. In particular, they address inherent limitations that require a natural person to be the director of a trustee company. They also ensure that Public Trustees can engage the services of a suitably qualified person to perform therole of trustee or director of the client’s SMSF.
1.22Part 3 amends the Australian Securities and Investments Commission Act 2001 to improve readability and clarity.
Financial impact
1.23Schedule 3 is ‘estimated to have nil or unquantifiable financial impact’.
Schedule 4—Exclusion of tobacco and gambling related activities from the Research and Development Tax Incentive
1.24Schedule 4 of the bill would amend the ITAA 1997 to exclude R&D activities relating to tobacco (as well as nicotine products and vaping goods) and gambling from the R&D Tax Incentive, except for activities conducted for the sole purpose of harm minimisation.
1.25The R&D Tax Incentive provides targeted tax offsets to encourage companies to invest in R&D. It consists of two core components:
a refundable tax offset equal to the entity’s company tax rate plus an 18.5% premium for eligible entities with an aggregated turnover of less than $20 million per annum, provided they are not controlled by income tax-exempt entities
a non-refundable tax offset for all other eligible entities equal to the entity’s company tax rate plus a two-tiered premium determined on the notional R&D expenditure as a proportion of total expenditure for the income year. The new rates will be the company tax rate plus
8.5% for R&D expenditure up to 2% of total expenditure
16.5% for R&D expenditure above 2% of total expenditure.
1.26As the Explanatory Memorandum explains, R&D activities related to gambling can exacerbate gambling addictions and associated harms, while R&D related to tobacco can increase health risks. The amendments are intended to ensure that the government is not inadvertently subsidising such R&D activities.
1.27In instances where R&D activities are solely for the purpose of harm minimisation, those activities will remain eligible for the R&D Tax Incentive.
1.28The changes were announced in the 2024-25 MYEFO.
1.29The changes will commence for income years starting on or after 1 July 2025.
1.30Details on important aspects of the bill—including what is meant by ‘a gambling service, gambling or a gambling-like practice’—is provided in the Explanatory Memorandum.
Financial impact
1.31Schedule 4 is ‘estimated to increase receipts by $12.0 million and to decrease payments by $8.0 million over the five years from 2023–24’. The estimated impact on receipts is outlined below in Table 1.3.
Table 1.3Estimated impact on receipts
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Receipts ATO | - | - | - | $6.0m | $6.0m |
Related payments ATO | - | - | - | - $4.0m | - $4.0m |
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Source: Explanatory Memorandum, p. 4.
Compliance costs
1.32The Explanatory Memorandum states Schedule 4 is ‘expected to have minimal regulatory impact’.
Commencement details
1.33If enacted, the bill’s schedule would commence as noted in Table 1.2.
Table 1.4Commencement details for the bill's schedules
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1 | On the first 1 January, 1 April, 1 July or 1 April after the bill receives Royal Assent. |
2 | On the first 1 January, 1 April, 1 July or 1 October after the bill receives Royal Assent. The proposed amendments to: section 202DP of the ITAA 1936 would apply to income years starting on or after 1 July 2026; and section 202DR of the ITAA 1936 would apply to notice given to a trustee on or after the commencement of Schedule 2 and the first income year of the trust on or after 1 July 2026. |
3 | On the day after the bill receives Royal Assent. |
4 | From income years starting on or after 1 July 2025. |
Source: Explanatory Memorandum, pp. 1–4.
Human rights implications
Schedules 1 and 3
1.34The Explanatory Memorandum states that schedules 1 and 3 are compatible with human rights as the schedules do not engage any of the applicable rights or freedoms in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Schedule 2
1.35The Explanatory Memorandum states that Schedule 2:
…engages the right to protection from unlawful or arbitrary interference with privacy under Article 17 of the International Covenant on Civil and Political Rights (ICCPR) because it requires trustees of closely held trusts to report beneficiary TFNs that have been quoted to them to the Commissioner.
1.36Further, the Explanatory Memorandum notes the right to privacy may be subject to ‘permissible limitations, where these limitations are authorised by law and are not arbitrary’.
1.37According to the Explanatory Memorandum, Schedule 2’s amendments streamline the process for trustees of closely held trusts to disclose trust beneficiary’s confidential information to the Commissioner. A trust beneficiary can choose to quote their TFN to a trustee and, should they do so, existing privacy safeguards apply in accordance with the Privacy Act 1988 and the Privacy (Tax File Number) Rule 2015. Additionally, the Explanatory Memorandum notes that the ATO is ‘subject to strict tax secrecy provisions in the tax law’.
1.38The Explanatory Memorandum concludes that Schedule 2 is compatible with human rights as ‘to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate’.
Schedule 4
1.39The Explanatory Memorandum states that Schedule 4 promotes:
the right to health—Article 12(2)(c), International Covenant on Economic, Social and Cultural Rights; and
the right to life—Article 6, International Covenant on Civil and Political Rights.
1.40As the Explanatory Memorandum notes:
Use of products related to tobacco can cause serious health conditions such as lung disease and cancer. Gambling can affect psychological health by triggering mental health conditions such as anxiety and depression.
1.41The Explanatory Memorandum states that Schedule 2 ‘ensures that the R&D Tax Incentive is not supporting the development of products related to these activities which can negatively impact the health of individuals’. As such, the Explanatory Memorandum concludes Schedule 2 is ‘compatible with human rights as it does not raise any human rights issues’.
Legislative scrutiny
1.42As at the time of writing, neither the Senate Standing Committee on the Scrutiny of Bills or the Parliamentary Joint Committee on Human Rights had reported on the bill.
Conduct of the inquiry
1.43The committee advertised the inquiry on its website and wrote to a range of stakeholders to invite them to make a submission by 17 April 2026.
1.44The committee received 9 submissions, as listed at Appendix 1. The committee did not hold a public hearing as part of its inquiry.
Acknowledgements
1.45The committee extends its thanks to the individuals and organisations who contributed to the inquiry by making written submissions.