The Australian government has announced it will amend its budget to repeal a measure that critics had dubbed the "widow's tax." This change ensures that investment properties will retain their grandfathered exemptions to changes in capital gains tax and negative gearing rules when an owner dies or a couple divorces.
Independent Senator David Pocock had led calls for the Labor government to alter the legislation, arguing it would unfairly impact Australians. Finance Minister Katy Gallagher confirmed the government's intention to amend the bill.
"We have made clear from the get-go... that we were aware that there would be tranches of legislation… that would require us to work through some particular and specific interactions of tax law in subsequent legislation," Gallagher stated. She added that the government was aware of concerns regarding grandfathering and shared ownership and intended to address these arrangements for jointly owned assets in cases of inheritance or divorce.
The measure, if enacted as originally proposed, would have affected approximately 680,000 properties acquired before budget night on May 12. Senator Pocock had sought amendments to guarantee that certain capital gains tax and negative gearing concessions would remain available when an asset is transferred due to a family law court order or the death of a joint tenant. His proposed amendments would allow the recipient of the asset to apply the same concession to a later capital gain as the transferor would have been entitled to.
Following the government's announcement, Senator Pocock withdrew his planned amendments. He expressed that while the situation was not ideal and should have been addressed in the primary legislation, he was willing to accept the government's commitment in good faith.
This is not the first adjustment the Albanese government has made to its budget since its release last month. Prime Minister Anthony Albanese previously announced an expansion of eligibility for capital gains tax discounts for small businesses, increasing the turnover threshold from $2 million to $10 million.