Labor proposes fix to protect inheritance of negative-gearing benefits

The Albanese government plans to amend its tax reforms so that spouses inheriting an investment property retain existing negative-gearing deductions.

In response to criticism that its recent budget created a so-called “widow tax,” the Albanese government is consulting on amendments that would let inheritors keep the negative-gearing benefits attached to an investment property. The draft proposal, released for feedback until 21 August, also extends the definition of a “new” home to 24 months after occupancy certification, allowing developers and investors a longer window to sell without losing deductions.

Additional exemptions would preserve negative gearing for properties used for NDIS disability accommodation, affordable community housing, public housing and qualifying build-to-rent projects. A practical formula is also being introduced to ease the transition to a new capital-gains tax model that replaces the 50 % discount with an inflation-indexed approach. Opposition leader Jane Hume criticised the government for rushing the original legislation and promised careful scrutiny of the revisions. Treasury Minister Jim Chalmers said the consultation reflects the government’s commitment to fine-tune its ambitious tax reform agenda.