Every dollar this government overspends comes back out of the taxpayer, and Australians are running out of patience with consistently wearing the burden of those costs. The widow tax is the clearest example yet, a tax nobody voted for, nobody announced and nobody could defend once it was read properly.
Jim Chalmers has now published draft legislation to abolish it, 40 days after his government undertook to deal with it and six weeks after his ministers told the country there was nothing wrong with it. Treasury released the draft on Tuesday night after public backlash, and it reaches further than the version Labor and the Greens voted down in June.
It still can't become law in the fortnight that starts on Monday, because consultation closes on 21 August, parliament rises 20 August, and the next sitting period doesn't begin until 7 September. So One Nation, independent senator David Pocock, the Coalition and the Greens will move together when parliament returns on 11 August to force the abolition through the Senate.
Pauline Hanson has thrown One Nation behind David Pocock
One Nation leader Pauline Hanson spent Tuesday publicly backing a senator she agrees with on very little, and for next week that matters more than the draft does.
"Labor rammed through tax changes it had promised before the election never to make. 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. 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. You escape a violent home and Labor taxes you for leaving. The protections Labor promised vanish on the worst day of your life. Some 680,000 jointly owned properties are now exposed. Labor and the Greens rammed it through anyway. David Pocock and I don't always agree, but he has been dead right on this. He shouldn't have to fight it alone. When the Senate returns, One Nation will support his amendments and do everything we can to help him right this wrong."
Hanson also said Labor never voted Pocock's amendments down but "dodged them with a promise they broke". Pocock took the offer of help, saying it was good to see so many senators treating it as urgent.
What the fix actually covers
Treasury released four sets of draft legislation on its consultation hub under Jim Chalmers' name, and we read the exposure draft rather than the summary. The fix inserts four new sections into the Income Tax Assessment Act and covers more ground than the amendment Labor and the Greens voted down on 29 June.
| New section | Who it covers | What it does |
|---|---|---|
| 26-156 | A surviving husband or wife. | Where your spouse dies and you take their share, you are treated as having acquired it before budget night, so the negative gearing and capital gains treatment carries on. |
| 26-157 | A surviving co owner who isn't your spouse. | Covers people who own a rental with a sibling, a friend or a business partner, provided both of you held your shares before budget night. |
| 26-158 | Divorce and separation. | Where a property comes to you from a spouse or former spouse under a Family Court order, agreement or award, you are treated as having acquired it before budget night. |
| 26-159 | The capital gains side. | Carries the new dwelling treatment across to capital gains, so the repair isn't limited to negative gearing. |
None of it helps the woman whose settlement is happening now
A draft isn't a law. Lenders are deciding today against the Act as it stands, and Pocock told Chalmers the Federal Circuit and Family Court and financial lenders have already changed how they deal with parties because of it. The 44 year old woman at the centre of this is trying to complete a property settlement after three lenders knocked her back, having held pre approval before the bill passed. On the drafting, the fix commences on the first 1 January, 1 April, 1 July or 1 October after royal assent.
Six weeks ago the government said there was nothing to fix
Nothing in the law changed between 24 June and 4 August. Katy Gallagher called the rules "reasonable arrangements" in question time, Assistant Minister Andrew Leigh told ABC Radio Canberra the government wasn't changing them, and the Senate voted a fix down 32 to 25. What changed was that people would not let it go, and one woman put her circumstances on the record through her senator. Worth remembering the next time somebody says complaining changes nothing.
This is what Labor's spending is being paid for with
Nobody argued for the widow tax. It fell out of a tax package written fast to raise money, given a two day Senate inquiry and voted through before the month was out. The government is running a $31.5 billion deficit this financial year, with gross debt at $982 billion. Treasury told the Senate that the negative gearing and capital gains changes alone bring in $1.35 billion in their first year and $2.28 billion the year after.
It has been sold throughout as a gift to first home buyers. The people who lose a tax concession because their husband died weren't mentioned on budget night, and were still being told nothing was changing on the morning the bill passed.
What happens when parliament returns on 11 August
The Senate can't make law on its own, so an abolition bill still needs the House, where the government has the numbers. What the crossbench is betting on is that Labor won't want to be seen voting against abolishing a widow tax twice. The Australian Financial Review reports the same combination forced a change to aged care assessments a month ago by exactly this method.
The law it's meant to fix starts operating on 1 July 2027.
This article is general information only and not financial, tax or legal advice. Everyone's circumstances are different and these rules are complex and not yet final. Before acting, speak to a registered tax agent or a licensed financial adviser about your own situation.
