A leading Australian tax lawyer has warned that sweeping changes to capital gains tax, negative gearing and discretionary trusts could leave ordinary taxpayers and advisers struggling to understand their obligations, potentially pushing people who are trying to comply with the law into expensive disputes with the Australian Taxation Office.

Tracey Dunn, a tax lawyer and Associate Director at Perth-based Birchstone Legal Group who previously worked as a director in EY’s private tax practice, raised the concerns at the 2026 Tax Summit in Sydney.

Dunn’s criticism is not primarily that the government has no right to reform the tax system. Instead, she argues that the speed, sequencing and complexity of the changes risk producing rules so difficult to interpret that taxpayers, accountants and lawyers may reach different conclusions about what the law requires.

That, she warned, could have serious consequences. Where legislation is ambiguous, the ultimate answer can depend on ATO rulings, objections and eventually the courts — a process that can be costly even for taxpayers who believed they were acting properly.

The warning comes as the Albanese government continues implementing one of the largest packages of Australian tax changes in years, covering capital gains, residential property investment, deductions for workers and the taxation of discretionary trusts.

What is actually changing?

The first major tranche of the government’s reform package is already law.

From July 1, 2027, the existing 50 per cent capital gains tax discount for individuals, trusts and partnerships will be replaced for affected gains by new indexation arrangements combined with a minimum 30 per cent tax rate on net capital gains.

The government says transitional rules will protect gains that accrued before the new system begins, while some investments in new housing will retain access to the existing 50 per cent discount under specified conditions.

Negative gearing rules for residential property will also change from July 1, 2027. The government is directing the concession towards newly built homes, arguing that tax incentives should encourage additional housing supply rather than competition between investors and first-home buyers for established properties.

Properties held before the reforms were announced at 7.30pm on May 12, 2026 are protected by grandfathering arrangements.

The reforms were introduced into the House of Representatives on May 28 as part of the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026. The legislation passed the House on June 4, cleared the Senate on June 25 and received Royal Assent the following day.

That legislative timetable is central to Dunn’s criticism.

Consultation continued after the core law was moving through Parliament

Dunn has questioned why significant elements of the new regime were still being consulted on while Parliament was already considering — and ultimately passing — the core reforms.

One example was the government’s consultation on special capital gains tax arrangements for innovative start-ups. That consultation ran from June 18 until July 10, meaning the Tax Reform No. 1 legislation had passed both houses of Parliament before that consultation period had finished.

Treasury later released another tranche of draft legislation on August 4 dealing with more complicated CGT and negative-gearing issues.

Those drafts addressed matters including inherited property, relationship breakdowns, Attribution Managed Investment Trusts, testamentary trusts, taxpayers who are Australian residents for only part of an asset’s holding period and the treatment of certain deferred capital gains.

The government’s position is that this staged approach allows complex implementation questions to be addressed progressively while preserving the central policy already approved by Parliament.

Dunn sees a risk in the opposite direction: if fundamental legislation is enacted before all of the practical interactions have been worked through, later fixes may become necessary and advisers may be forced to interpret different tranches of legislation at the same time.

For a tax professional, that is not merely an administrative inconvenience. Tax law frequently interacts with trust deeds, company structures, family arrangements, property transactions and earlier tax decisions. A seemingly narrow amendment can therefore produce consequences far beyond the transaction that prompted it.

Why compliant taxpayers could still face trouble

The concern is particularly significant because Australia’s tax system relies heavily on self-assessment.

Taxpayers and their advisers must interpret the law, calculate liabilities and lodge returns on the assumption that their interpretation is correct. The ATO may later take a different position.

Where legislation is clear, that system can operate relatively predictably. Where it is ambiguous, however, disagreements can move through amended assessments, objections, the Administrative Review Tribunal or the courts.

Dunn’s warning is that complex drafting can turn what should be a compliance question into a legal dispute.

That does not mean Australians will automatically be taken to court because of the reforms, nor is there evidence that the government intends to punish people who make genuine mistakes. The point is that poorly understood legislation can create uncertainty over what a compliant position actually is.

The risks can be particularly acute for small and family businesses. Many operate through combinations of companies and discretionary trusts, use family trust elections, have accumulated tax losses or distribute income through several related entities.

The taxation of those structures is already highly technical.

Adding new minimum taxes, offsets, transitional provisions and restructuring rules means advisers must consider not only how much tax a transaction creates today, but how a change in structure could affect future distributions, losses, beneficiaries and asset protection arrangements.

Discretionary trusts are the next major battleground

The government’s proposed changes to discretionary trusts illustrate the complexity.

From July 1, 2028, the government intends trustees of affected discretionary trusts to pay a minimum tax of 30 per cent on taxable trust income.

Beneficiaries would still declare distributions in their own tax returns, while non-corporate beneficiaries would generally receive a non-refundable credit for tax paid by the trustee.

The government argues that this will better align the taxation of trust income with tax paid by Australians earning wages.

Treasury says more than 90 per cent of private trust wealth is held by the wealthiest 10 per cent of households, while families using discretionary trusts have historically faced a lower average tax rate than otherwise similar households without them.

At the same time, the government acknowledges that trusts are used for legitimate purposes including succession planning, asset protection and the operation of family businesses.

Its current proposal therefore contains exemptions for categories including charitable trusts, special disability trusts, superannuation funds, primary production income and some testamentary arrangements.

Businesses would also receive restructuring options before the new tax begins.

On September 3, the government released a fresh exposure draft after an earlier consultation conducted in July. One new option would allow a discretionary trust to escape the minimum tax if it elects to make fixed distributions to nominated beneficiaries, potentially allowing some taxpayers to avoid a complete restructure.

Consultation on that draft remains open until September 18.

For Dunn, however, the challenge is not merely the headline 30 per cent rate. It is how the rules interact with the complicated body of existing trust and tax law.

Trustees can owe legal obligations to beneficiaries that are separate from their tax obligations. A restructure that appears sensible from a tax perspective can have consequences under the trust deed or general trust law.

Similarly, distributions through companies or other trusts can affect tax losses, unpaid entitlements and the classification of beneficiaries.

Those interactions are where unintended consequences can emerge.

The Big Four question

Dunn has also raised a more politically sensitive explanation for why experienced tax practitioners may not have been as influential in developing the reforms as she believes they should have been.

She suggested the government may have been reluctant to rely heavily on the large professional services firms following the scandal involving PwC’s misuse of confidential Treasury information.

That remains Dunn’s theory rather than an established government policy.

But the history behind it is significant.

A series of parliamentary inquiries found that former PwC partner Peter Collins obtained confidential information while participating in Treasury consultations on new multinational anti-avoidance measures between 2013 and 2016.

Despite signing confidentiality agreements, Collins shared information with other PwC personnel in Australia and overseas. Parliamentary investigations found the information was used in efforts to help clients respond to or avoid the impact of laws that had not yet been publicly introduced.

The affair became one of Australia’s biggest professional-services scandals and prompted reforms to the regulation of tax advisers, government information-sharing arrangements and consulting firms.

The consequences also extended beyond PwC, feeding a broader debate about conflicts of interest across large accounting and consulting partnerships.

Dunn argues, however, that wrongdoing by individuals or firms should not mean government abandons the technical expertise traditionally used to test tax legislation before it becomes law.

Experienced practitioners, she says, encounter unusual structures and transactions every day and can identify drafting problems that may not be obvious from a policy document alone.

That argument goes to the heart of the current dispute: how should governments draw on private-sector tax expertise without recreating the conflicts of interest exposed by the PwC scandal?

Treasury rejects the claim that consultation has been inadequate

Treasury disputes the suggestion that its reform process has shut out professional expertise.

The department says extensive consultation has taken place with industry bodies, accounting organisations, law firms and other stakeholders, and points to multiple consultation rounds covering capital gains tax, negative gearing, innovative businesses and discretionary trusts.

The government has also made changes as consultations have progressed.

Its August CGT package dealt with circumstances not fully addressed by the original legislation, while the latest discretionary-trust draft includes additional restructuring options and expanded exemptions.

The government therefore presents the continuing consultation as evidence of responsiveness rather than proof that the reforms were rushed.

It also maintains that the underlying tax changes are necessary.

Treasurer Jim Chalmers has framed the package as an attempt to reduce the difference between taxation of wages and income from assets, make housing investment incentives more supportive of new supply and use additional revenue to fund tax relief for workers.

That policy argument is separate from Dunn’s criticism about legislative design.

A person can support higher taxation of capital gains or discretionary trusts while still believing the resulting legislation should be simpler. Conversely, someone may oppose the policy even if the drafting is technically effective.

The real test will come when taxpayers have to use the new system

For most Australians, the technical debate may initially appear remote.

But the reforms will eventually have practical consequences for investors selling assets, landlords purchasing property, family businesses operating through trusts, beneficiaries receiving distributions and advisers signing off on tax returns.

The CGT and negative-gearing changes begin in July 2027. The proposed discretionary-trust minimum tax is intended to follow in July 2028.

Between now and then, Treasury will continue developing regulations, exemptions and implementation rules.

That gives the government time to address some of the concerns raised by tax professionals.

It also means the final shape of parts of the system is not yet settled.

Dunn’s warning should therefore be read as a concern about legal uncertainty, not a prediction that every taxpayer affected by the reforms will face litigation.

The risk she identifies is more fundamental: when a tax law becomes difficult enough that experienced practitioners cannot confidently determine how it applies, Australians attempting to comply can become collateral damage in disputes over what Parliament actually intended.

Whether that happens will depend heavily on what Treasury does with the consultation now under way — and whether the remaining legislation can translate a politically ambitious tax agenda into rules that taxpayers can realistically understand and follow.