Crossbenchers including independent senator David Pocock welcomed draft legislation to amend Labor's changes to negative gearing and the capital gains tax discount, released on Tuesday, but said the fix could not come soon enough.
The amendment will remove an oversight in the original legislation, which passed parliament in June, that would otherwise result in widows and divorcees losing negative gearing on an investment property they previously jointly owned with a spouse.
At the time, Treasurer Jim Chalmers promised to remove the loophole in future legislation.
But Senator Pocock on Monday revealed a victim of domestic violence had approached him claiming she was set to lose an investment property she has held with her partner, as a result of the changes.
The woman said banks rejected her applications to refinance the property because she would no longer be able to negatively gear it beyond July 2027, as the legislation stands.
Under Labor's tax changes, people who owned an investment property before budget night on May 12 could continue to negatively gear it.
But properties that were purchased or changed ownership following that date lost the concession, meaning any losses accrued on the property could not be offset against the owner's personal income.
The draft amendments, which also cover changes to the capital gains tax and trusts, are up for consultation until August 21.
Senator Pocock is exploring ways to push the amendments forward during the next sitting fortnight, which begins on Tuesday.
"The substance of the announcement appears to address many of the most urgent concerns with the bill," he said.
"However, the timing for passage of this legislation is important.
"It's critical that lenders are able to consider preserved benefit in assessing loan serviceability in decisions they are making now and in coming months."
One Nation leader Pauline Hanson was on a rare unity ticket with the former Wallaby.
"David Pocock and I don't always agree, but he has been dead right on this," she said in a post on X.
"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."
Senator Pocock's bill would need support from the Greens and the coalition to pass the Senate, given Labor is not inclined to pass the changes before the consultation period is finished.
Greens senator Barbara Pocock said her party had only just received the draft exposure document and would take time to consider it.
Despite Labor promising to close the loophole, the opposition maintained it would repeal the tax changes if it formed government.
"What we need is economic change and a sense of hope with the Australian community. Instead, we've got a sledgehammer," shadow treasurer Tim Wilson told reporters in the Sunshine Coast.
The draft amendments also settled the definition of what properties counted as new builds and would qualify for the generous tax concessions that existed before the budget.Â
Housing Industry Association chief economist Tim Reardon said the updated definitions confirmed knockdown-rebuilds would not be considered new builds, discouraging replacing a derelict house with a new home.
But developers were thrown a sweetener as they will now have 24 months to sell a property and have it count as a new build, double the time limit set in the original legislation.
"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," Dr Chalmers said.
Labor also killed off a potential "death tax" scare campaign from the opposition by ensuring a new 30 per cent tax will not apply on testamentary discretionary trusts.
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