Prime Minister John Key stepped up his attack on Labour's capital gains tax today, suggesting it will create a headache for grieving children who inherit a house on the death of their parents.

After taking shots at Labour Leader David Cunliffe over whether the tax would apply to family homes held in trust, the Government's attack has turned to his changing position on when the tax would begin to apply to inherited homes.

Yesterday, Mr Cunliffe said there would be one month grace period. This morning he said the period was yet to be determined.

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This afternoon Mr Key said: "You'd have to say by any definition it's a complete and utter mess."

Mr Key said Mr Cunliffe had yesterday told New Zealanders "that if they don't sell the family home of their deceased parents, then within one month they will have to start paying a capital gains tax".

"'That is a horrifying thought for New Zealanders to be put in that position. Probate wouldn't even come through within one month.

"I think everyone would accept the number one priority when your parent or parents pass away is not whether you should be out there flogging off the family home so you don't have to pay a capital gains tax, it's dealing with all the emotions and stress and issues that go with losing a loved one."

Labour's policy states the tax is payable only on the gains since inheritance and only when the home is sold.

Mr Cunliffe this morning said the fine details of when an inherited home would be liable for the tax would be worked out by and expert advisory group.

"Other countries have a range of periods -- Aussie uses two years, some countries from the point of death, others from the point of settlement."

Mr Key said Labour should have the answers now.


"We are now a couple of weeks out from an election this is a key policy for Labour and they can't tell New Zealanders when it comes to their number one asset, their family home, how it will be treated."

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