No more ‘widow’s tax’ after changes to tax reforms

THE government is moving to fix its so-called “widow’s tax” following criticism its tax reforms denied Australians, who inherited an investment property from their partner, access to negative gearing concessions.

The fix is part of a raft of the federal government’s proposed changes to controversial reforms that were passed in June.

The draft amendments, which also cover capital gains tax and trusts, were announced by treasurer Jim Chalmers on Tuesday.

Under the government’s changes to negative gearing, investors would only be able to use rental losses to reduce tax on other income if the property was newly built. 

The legislation grandfathered existing properties but people who jointly owned an investment property with their partner before the May cut-off would lose their negative gearing concession if their partner died or they divorced.

The unintended consequence was because inheriting a jointly-owned property would happen after the grandfathering period.

The change was condemned for its impact on widows and divorcees, with opposition treasury spokesman Tim Wilson in June slamming Labor for “financially bullying widows in their moment of grief”.

Chalmers said its changes 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”.

Wilson was unmoved by the treasurer-proposed fix on Tuesday night and vowed the opposition would repeal the tax changes if it won government.

“The government is now trying to diffuse the landmines they’ve laid across the economy but it’s not enough. They haven’t found them all and they’re certainly not prepared to diffuse all of them,” Wilson told Sky News.

“Australians deserve to go to an election, vote for a government, and then for that government to honour its commitments.

“We know already that there are widows that are being hit by Chalmers’ higher taxes,- but what he’s done is given an edict basically to the banks not to implement the law.

“It should be done, it should have been done properly the first time and the best way to do it is to make sure it goes through a process, make sure we get input for people who are impacted.”