An independent senator has called for Treasurer Jim Chalmers to urgently fix a loophole in budget tax reforms that leaves ex-partners and widows vulnerable.
David Pocock wrote to Chalmers and met with the Treasurer’s staff on Monday to discuss the ‘widow tax’ after a domestic violence victim became the first known casualty of the controversial reform.
Pocock has highlighted an ongoing issue with Labor’s changes to negative gearing and the capital gains tax discount.
Both reforms were announced in May’s Federal Budget.
From July 1 next year, new investment property owners will no longer be able to claim back the costs or interest of their asset under negative gearing.
Properties purchased before the May 12 Budget are grandfathered, allowing owners to keep the benefit.
However, the change inadvertently added an extra cost to spouses – nicknamed the widow tax.
When a co-owned property is moved from two spouses to one through divorce or death, it is counted as a new ownership.
Independent senator David Pocock (above) heard from a 44-year-old domestic violence victim who is at risk of losing her investment property due to negative gearing changes
Treasurer Jim Chalmers (pictured with wife Laura) earlier swore to mend the loophole causing the ‘widow’s tax’ in the second round of Budget legislation
It means that the property can no longer be negatively geared.
A woman, 44, who left a violent marriage recently wrote to Pocock explaining she faced losing an investment property she spent 15 years working for, the Australian Financial Review reported.
‘The practical consequence is devastating. If I am unable to obtain finance to complete my property settlement, I may have no option other than to sell my only investment property,’ she wrote.
‘This would effectively force me to lose a key retirement asset that I have spent more than 15 years building, at a time when I am already navigating the financial and emotional consequences of leaving a domestic violence relationship.’
The woman had co-owned an investment property with her former partner.
She had been conditionally pre-approved to refinance her loan to take over the asset before the tax changes were announced.
However, lenders pulled out when they realised her property could not be negatively geared after July 1, 2027.
In his letter to Chalmers, Pocock also cited anecdotal evidence from family law practitioners in the ACT.
There are growing calls for Prime Minister Anthony Albanese and Treasurer Jim Chalmers to fix a loophole in budget tax reforms that leaves ex-partners and widows vulnerable
‘They are witnessing similar behaviour from lenders and … this is impacting family law outcomes,’ he wrote.
‘This is an urgent and deeply concerning development adversely impacting an indeterminate number of Australians, many by the nature of events in deeply vulnerable circumstances.’
The Daily Mail has contacted Pocock for further comment.
The Albanese government had promised to clean up the widow tax loophole in its second round of legislation but Pocock has pushed for it to be addressed at parliament’s next sitting, starting next week.
It’s understood draft legislation to fix the issue will be released by the Treasurer later this week.
