Government drops ‘widow tax’ on negative gearing and capital gains changes

Labor has announced it will drop the so-called “widow tax” in its next tranche of tax reforms after widespread pressure from the opposition and crossbench.

Under the reforms to negative gearing and the capital gains tax discount announced in the May budget, a widow or divorcee would have lost their tax concession – which Labor promised to fix under subsequent legislation.

It was revealed in June that, for example, if a property owned by a couple, they would lose grandfathered exemptions to negative gearing and capital gains tax in the event of a divorce or death, and the property was transferred to one of the partners.

The treasurer has also exempted beneficiaries of “genuine testamentary trusts, deceased estates and special disability trusts” from the new minimum tax on capital gains.

The government will now consult on the latest changes.