Widows and divorced partners could keep old home tax breaks
A new tax law cuts back two tax breaks on homes bought after budget night 2026. That is the night the government announced its yearly plan for tax and spending. This bill would stop people losing the old rules when a partner or co-owner dies, or a relationship ends.
Official name: Treasury Laws Amendment (Removing the Widows and Spouses Tax) Bill 2026
- Under another law, homes bought before 7.30pm on 12 May 2026 keep the old tax breaks. So do new homes.
- Right now, a home that passes to you when a partner dies or you split up could lose those breaks.
- This bill would let you keep them, as if you had owned the home from the start.
- Senators Matthew Canavan and David Pocock brought the bill. It is still before the Senate.
Who it affects
- People whose husband, wife or partner dies: They could keep both tax breaks on a rental home they inherit.
- People who split up and take over a shared rental home: Getting the home from their ex under a court order would no longer cost them the old tax breaks.
- Friends or relatives who co-own a home: If one owner dies, the others who take their share could keep the old tax treatment.
- People who rent out their own home: They could use the date they first bought the home when the new rules are applied.
Home tax breaks cut back
This bill depends on another tax law. Its name is the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026. That law cuts back two tax breaks for people who own homes to rent out or sell later.
The first break is negative gearing. Say your rental home costs you more than it earns. You can use the loss to lower the tax on your wages.
The second break is a discount on capital gains tax. That is the tax on the profit when you sell something for more than you paid. Normally you pay tax on only half of that profit.
The first tax law keeps these breaks for homes bought before budget night. That was 7.30pm, east coast time, on 12 May 2026. It also keeps them for new homes.
Keeping old rules for things you already own is called grandfathering.
Taxed from the takeover date
Under the tax rules, a person who takes over a home is often treated as buying it on the day they take it over. That can be the day a partner dies. It can be the day a court splits up a couple's property after a breakup.
If that day is after 12 May 2026, the home could look like a new purchase under the new rules. The person would lose the old tax breaks, even though the home was bought long before.
The two senators call this the widows and spouses tax. They say it would hurt people, often women, at a time of death, breakup or family violence.
When a partner dies
The bill adds a new rule for a husband, wife or partner who is left behind. Partner here includes someone you live with as a couple without being married.
It covers two ways a home can pass on. In one, a couple owns the home together and the survivor owns all of it straight away when the other dies. In the other, the survivor gets the home through the dead person's will.
Say the partner who died bought the home before budget night 2026. Then the survivor is treated as buying it at that same time. If it was a new home for the partner who died, it counts as a new home for the survivor too.
Say Mary and John bought a rental flat in 2015. John dies in 2027. Under this bill, Mary can still use negative gearing on the flat.
When a co-owner dies
Some homes are owned by people who are not a couple, such as brothers and sisters or friends. The bill adds a rule for them too.
Each survivor must already own part of the same home. They may own it all together, with the survivors taking over on a death. Or each person may own a set share.
Say everyone bought their shares before budget night 2026. The survivor who takes the dead person's share is treated as buying it at the old time. The same works for a home that was new for them.
When a couple splits
After a breakup, one partner often takes over a home from the other. The bill covers this when it happens because of a court order. It also covers a deal a court has approved, or a similar ruling.
The bill also covers a home handed over as part of that deal from a company or trust linked to the couple. A trust is a fund held and run for others.
Say the partner giving up the home bought it before budget night 2026. Then the partner who gets it is treated as buying it then. If it was a new home for the one giving it up, it stays a new home for the one who gets it.
Say a couple owns a rental unit together that they bought in 2019. They divorce in 2027 and a court gives the unit to one of them. That person keeps negative gearing on the unit.
Keeping the capital gains discount
Part 2 of the bill gives the same protection for capital gains tax.
Say a home counts as new for the person under the bill's rules. Then it also counts as new when they sell it. They keep the 50 per cent discount. Or they can use the older way of raising the price paid in line with rising prices.
The bill also stops two other new rules from applying in these cases. One treats the home as sold and bought again. The other is a 30 per cent floor on the tax on the profit.
Renting out your own home
Your main home is the home you live in. Under the rules now, you might later rent it out. Then tax law can treat you as getting it on the day you first earn rent from it.
The bill says that date should be ignored for the limit on negative gearing. Say you first bought your home before budget night 2026, or it was a new home. Then you can use the date you first bought it.
Waiting in the Senate
This is a private bill. Senator Matthew Canavan and Senator David Pocock brought it to the Senate together. Private bills come from members of Parliament, not from the government.
The bill was put to the Senate on 13 August 2026. A vote on its main idea was proposed that day.
It still needs a vote in the Senate, then a vote in the House of Representatives, the larger house of Parliament. Then the Governor-General, the King's stand-in, must sign it into law.
If it passes, it would start on the first 1 January, 1 April, 1 July or 1 October after it is signed.
Its journey through Parliament
| 13 Aug 2026 | Senate: Introduced and read a first time |
| 13 Aug 2026 | Senate: Second reading moved |