Widow Tax Loophole Closed

The tax reform bill that closes the ‘widow tax’ loophole has been passed in parliament.

The so-called “widow tax” issue emerged when the Federal Government introduced a tranche of changes to property investment taxes, including not allowing claims for negative gearing on existing properties purchased after July 2027.

That change unintentionally meant if a jointly owned property purchased before that date, was transferred to one co-owner after death or divorce, it would be treated as an ownership change, meaning the remaining owner could no longer claim negative gearing on the investment.

Under changes passed by Parliament, that will no longer be the case.

It also ensures that new builds will retain access to negative gearing and concessional capital gains tax treatment in the same circumstances.

The government has also shifted its definition of a “new property,” which, under the changes, will continue to qualify for negative gearing concessions.

A property will generally be considered ‘new’ where it genuinely adds to housing supply, provided the property was acquired within 24 months of a certificate of occupancy being issued.