Treasurer Jim Chalmers fulfils promise to scrap 'widow tax' amid mounting pressure over negative gearing reforms

By ASHLEY NICKEL, NEWS REPORTER, AUSTRALIA Published: 15:53, 4 August 2026 | Updated: 15:55, 4 August 2026 Treasurer Jim Chalmers has announced a new concession to effectively axe the 'widow tax' after a domestic violence victim faced losing her investment property. Chalmers announced on Tuesday night that properties acquired from spouses 'as a result of inheritance or relationship breakdown' will retain grandfathered negative gearing. Independent senator David Pocock brought the issue to the surface on Monday after hearing from a domestic violence victim who was unable to refinance her co-owned investment property.  Chalmers has since revealed that the movement of assets from two spouses to one would no longer be considered new ownership. The new legislation will also clarify issues around 'new' investment dwellings, which are allowed to be negatively geared. The amendment comes after the Treasurer previously promised to fix the widow tax in a second round of Budget legislation. 'The draft materials also include the definition of a new residential dwelling and types of housing investment exempt from the limits on negative gearing,' Chalmers said. '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. Treasurer Jim Chalmers (pictured with wife Laura) on Tuesday said investment properties moved from two spouses to one during martial breakdowns will keep negative gearing 'This extends the 12 months set out in the Budget to provide builders and developers time to sell stock on hand.'  Labor had announced changes to negative gearing and the capital gains tax discount 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 was moved from two spouses to one through divorce or death, it counted as a new ownership - meaning the property couldn't be negatively geared. Pocock had recently received a letter from a woman, 44, who left a violent marriage. She explained 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. Changes in the Federal Budget inadvertently created a 'widow tax' by counting investment properties moved through divorce as new ownership '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. '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 story prompted a reaction from One Nation leader Pauline Hanson, who backed Pocock's calls for the widow tax to be amended.  Independent senator David Pocock (above) highlighted the issue on Monday after hearing from a domestic violence victim 'Senator Pocock is right. Labor rammed through tax changes it had promised before the election never to make,' Hanson said. 'Then they made them anyway. Labor lied. None of it was properly thought through. Labor pushed the tax bill through parliament without a proper hearing, and it shows.' Hanson warned that 'ordinary Australians will pay the price'. 'Senator Pocock warned what it would do to people facing death, divorce or domestic violence. Your husband dies and, as you grieve, the government hits you with a tax,' she said. 'You escape a violent home and Labor taxes you for leaving. The protections Labor promised vanish on the worst day of your life.'