Shadow Treasurer Tim Wilson says Labor is doing a “patch-up job” on a bad budget. Photo: Tim Wilson.
Labor had dropped its so-called “widow tax” that was part of the May budget, following a public and political backlash over the planned measure.
But the Coalition says the government is simply trying to fix a mess it created for itself.
Tax reforms to negative gearing and the capital gains discount would have left a widow or divorcee without their tax concession if a property was transferred to just one partner’s name.
It appeared to be an unintended consequence of the tax changes, with the Federal Government promising to remedy it with new legislation.
That exposure draft legislation has now been released for consultation, and ensures those who gain sole ownership of an investment property through divorce or the death of a partner will keep the same negative gearing benefits.
Treasurer Jim Chalmers said this new tranche of legislation implemented the reforms to negative gearing and capital gains tax announced in the budget, with some changes.
“These reforms will help level the playing field for first home buyers, preserve the gains investors have made, and support investment in new housing supply,” he said.
“The draft amendments build on the core legislation passed by the parliament in June, addressing a number of more complex issues and ensuring the changes appropriately apply to a range of specific taxpayer circumstances and structures.
Those changes include:
- Preserving existing 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
- Application of the CGT changes to attribution managed investment trusts, with further consultation to consider options to lessen compliance costs for fund managers
- Exempting 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
- Ensuring the CGT changes apply appropriately to taxpayers who are only Australian residents for part of the period they directly hold an asset
- Ensuring the CGT changes do not inappropriately bring forward the taxing point for deferred gains as a result of certain CGT events.
Shadow Treasurer Tim Wilson said the Coalition welcomed the measure, but described it as a “patch-up job” and added that Labor must ensure a thorough consultation process.
“We know already that there are widows who are being hit by Jim Chalmers’ higher taxes, but what he’s done is given an edict basically to the banks not to implement the law,” Mr Wilson said.
“So, of course, it should be done. It should have been done properly the first time; and the best way to do it is to make sure it goes through a process, make sure we get input from those who are impacted, and of course, legislate as quickly as possible.
“But this is the problem of what happens when you have a rushed budget. The government doesn’t understand what it’s doing.
“Now they’ve laid landmines all across the economy, and now they’re trying to diffuse them. Of course, we welcome the government trying to diffuse the landmines they’ve laid across the economy.
“We’d rather they not make the Australian economy full with landmines as a first position … so, I don’t really give huge points for a patch-up job for creating the problem and then trying to solve the problem they created.”
Senior Nationals senator Bridget McKenzie suggested the release of new draft legislation was embarrassing for the government.
“I think what we’re seeing with another backflip from Labor is confirmation of Labor’s economic incompetence,” Senator McKenzie said.
“The fact that nearly three months after the Federal Budget is handed down, we’re having to again have to fix up a mess of Labor’s making.”
Independent ACT senator David Pocock, who was a loud voice in drawing attention to the flaws in the original bill, welcomed the changes.
He said the exposure draft legislation appeared to tackle “many of the most urgent concerns” that had been raised about the initial bill.
“However, the timing for passage of this legislation is important,” Senator Pocock said.
“It is critical that lenders are able to consider preserved benefit in assessing loan serviceability in decisions they are making now and in coming months.”
Original Article published by Chris Johnson on Region Canberra.
