Penny Wong has refused to guarantee Australians will not be forced to value family jewellery under Labor’s tax overhaul, raising fears the changes could affect deeply personal heirlooms like wedding rings and inherited keepsakes.

The argument erupted in the Senate after Liberal senator Maria Kovacic warned that the proposed capital gains tax changes might reach beyond traditional investments, extending into household possessions.

Current Australian Tax Office guidance treats jewellery as a collectable, meaning it can attract capital gains tax if acquired for more than $500. 

While lower-value personal-use items are typically exempt, collectables face stricter rules, and gains may be taxed when sold or transferred.

The row comes as the government moves to replace the longstanding 50 per cent capital gains tax discount with a 30 per cent flat tax tied to inflation.

'Can the minister guarantee that Australians will not be forced to obtain valuations for important family keepsakes, such as inherited jewellery, wedding rings of departed loved ones, watches and artwork, before July 1, 2027?' Kovacic asked during Wednesday's Senate Question Time.

Wong declined to give a clear yes-or-no answer.

'What the government is doing is replacing the 50 per cent capital gains tax discount with a new discount that is based on inflation,' she said.

'That will apply across all asset classes.'

Kovacic pressed further, asking about the administrative burden.

'Who will be required to pay for the valuations of these family valuables?' she said.

Again, Wong avoided specifics. 

'We are changing the discount available... and making sure it applies across all asset classes,' she said.

Kovacic accused the government of causing uncertainty and likened the reforms to a new tax on inheritance.

'Isn’t this exactly what Australians fear... a tax that reaches into family inheritances, a quasi-death tax... leaving ordinary Australians paying accountants and valuers just to deal with property that has been in their family for decades?' she said.

Wong shot back, accusing the Opposition of mounting a 'scare campaign'.

'The claims being made are a scare campaign on taxes which do not exist,' Wong said.

In a statement to Daily Mail, Kovacic compared the changes to a 'quasi-death tax'.

'Labor’s CGT changes are creating uncertainty for many Australians who simply want to pass family possessions such as wedding rings on to the next generation,' she said.

'Australians shouldn’t need a tax adviser to understand the implications of inheriting a family keepsake.'

'What is this, if not a quasi-death tax?'

Independent senator David Pocock warned the changes could cause real problems, arguing that if an asset is transferred after death or divorce, people may lose access to existing grandfathering arrangements for negative gearing and capital gains tax.

'Why is it the government is seeking... to remove people's access to grandfathering if there's a change in ownership... simply due to death or divorce?' he said.

'Isn’t it a bit disingenuous to say that it is consistent when under the current arrangements you continue to get the 50 per cent CGT discount, but going forward you won’t should your spouse die?'

Finance Minister Katy Gallagher defended the reforms as a measure to rebalance the tax system but refused to directly address the specifics.

'We are making these changes to make the system overall, fairer and simpler and to better align the tax paid on assets with the tax paid on income,' she said.

Gallagher stressed that existing investments would be protected under grandfathering rules.

'The grandfathering rules we have put in place are reasonable arrangements that mean what you owned at budget night can continue to be negatively geared in the future,' she said.

'There are often complex interactions and details which... we’ll work through in the usual way.' 

Pocock warned the reforms could disproportionately impact women, particularly after bereavement or relationship breakdown.

'Does the government concede that if this isn’t amended, it’ll be women who are disadvantaged the most, given women have 20 per cent less super on retirement and outlive us men?' he said.

Gallagher did not respond directly to the tax concern.

'The issues that women raise with me... are that they don’t have enough super, they haven’t earned enough income during their working life,' she said.