Widows and divorcees who faced losing negative gearing concessions under the government’s budget changes to property taxes in May will be protected under a raft of changes announced by Treasurer Jim Chalmers late on Tuesday.
The Treasurer revealed on Tuesday night the exposure drafts for the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 and related material.
Building on reforms to the capital gains tax and negative gearing already passed in June following a deal with the Greens, the reforms include a number of “more complex issues” applying to specific taxpayers.
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These include the so-called divorce and death tax, which faced pushback following the previous reforms.
In a statement, the government said the latest tranche would preserve eligibility for negative gearing or treatment as a new build in “certain circumstances, including for residential dwellings acquired from a spouse as a result of inheritance or relationship breakdown”.
It will also exemptions for capital gains “distributed to beneficiaries via genuine testamentary trusts, deceased estates, and special disability trusts from the minimum tax on capital gains”, consistent with exemptions from the minimum tax on discretionary trusts.
Treasurer Jim Chalmers revealed on Tuesday the exposure draft for the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026. NewsWire/ Tertius Pickard Credit: News Corp Australia
The government will also seek to consult further on the application of CGT changes for Attribution Managed Investment Trusts (AMITs) to reduce compliance costs for fund managers, ensure changes are appropriate for people only partly residing in Australia for the relevant period, and so that the changes do not “inappropriately bring forward the taxing point for deferred gains as a result of certain CGT events”.
The definition of a new residential dwelling and types of housing investment exempt from the limits on negative gearing will be included in the drafts, which are for consultation and may be amended before appearing before the parliament.
“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,” the government said in a statement.
“This extends the 12 months set out in the budget to provide builders and developers time to sell stock on hand.
A draft legislative instrument specifying the method for apportioning capital gains and losses for real property and assets without a readily ascertainable market value will also be included.
The government defended its approach to the reforms, which have faced pushback from the Coalition and some sectors of the business and housing sectors.
“Consistent with other significant tax reforms, the government will continue to finalise implementation of the reforms in further tranches of legislation,” the government said.
“These will include interactions with CGT rollovers and similar concessions, remaining aspects of the application of the CGT reforms to foreign, mixed and temporary residents, and any amendments required to ensure that the rules apply appropriately for certain special cases such as tax consolidated groups.”
The draft will be open until August 21.
