Government backtracks on divorce, death clause in investor tax reforms

On Thursday, 25 June, Labor passed a bill through the Senate to legislate the budget tax reforms, with support from the Greens.

This week, independent Senator David Pocock raised fears about investors losing legitimate access to grandfathered capital gains tax (CGT) concessions in cases such as death and divorce.

In a statement, he said Treasury had confirmed: “In the event of a transfer of an interest or part of an interest, the new owner of that part of an interest would no longer benefit from the exemption”.

Pocock said there was a possibility of the reforms disproportionately negatively affecting women, and that he would be moving an amendment to change the provision.

However, according to the Australian Financial Review, the government has indicated the matter would be addressed in a second tranche of changes to fix unintended effects of the reforms.

According to Finance Minister Katy Gallagher, the government was aware of the grandfathering and ownership issues, and intended to address “the arrangements for jointly owned assets in circumstances like inheritance, or divorce in subsequent legislation”.

Across the country, there are an estimated 680,000 jointly-owned investment properties that apply to the grandfathering exemptions.

The news came after the government’s decision earlier this week to abolish Australians’ ability to purchase residential property through self-managed super funds (SMSFs).

Despite the changes being touted as a boost for first-time buyers to enter the market, many in the industry felt the decision would have far-reaching consequences for the sector.

REB understands that the ban on SMSF investing could have negative ramifications for buyer’s agents and their client bases, with up to 20 per cent of purchasers utilising the wealth-building strategy.