Australian Treasurer Jim Chalmers has announced amendments to planned negative gearing reforms to effectively eliminate a "widow tax" that would have impacted individuals, particularly those experiencing domestic violence or relationship breakdowns. The change ensures that properties acquired from a spouse due to inheritance or relationship breakdown will retain grandfathered negative gearing benefits.
The issue was brought to public attention by Independent Senator David Pocock, who highlighted the case of a domestic violence victim facing the potential loss of an investment property. The woman, who had left a violent marriage, explained that she might be forced to sell her investment property, which she had spent 15 years building, due to difficulties refinancing her loan under the new tax rules.
Under the original plan announced in the Federal Budget in May, new investment property owners would not be able to claim negative gearing benefits from July 1, 2027. Properties purchased before the budget announcement were to be grandfathered. However, when a co-owned property was transferred from two spouses to one as a result of divorce or death, it was being treated as a new ownership, thus losing its grandfathered status.
This change inadvertently created a significant financial burden for individuals, often women, in vulnerable circumstances. One woman reported that lenders withdrew their support upon realizing her property could no longer be negatively geared, potentially forcing her to sell a key retirement asset.
Senator Pocock stated in a letter to Chalmers that family law practitioners were observing similar issues impacting family law outcomes, describing the situation as "an urgent and deeply concerning development adversely impacting an indeterminate number of Australians, many by the nature of events in deeply vulnerable circumstances."
One Nation leader Pauline Hanson supported Pocock's call for amendment, criticizing the government's handling of the tax changes and warning of the consequences for ordinary Australians.
Chalmers stated that the new legislation clarifies that the movement of assets between spouses will no longer be considered new ownership. The amendments also define what constitutes a "new" residential dwelling eligible for negative gearing, generally requiring the property to be acquired within 24 months of an occupancy certificate being issued to genuinely add to housing supply. This extends a previous 12-month period to allow builders and developers more time to sell existing stock. The government had previously promised to address the "widow tax" in a subsequent budget legislative package.