Significant changes to Australian tax laws were passed on 15 September 2026 to broaden the scope of the foreign resident CGT regime. These changes commence on 1 October 2026.
Key takeaway: From 1 October 2026, Australia’s foreign resident CGT rules will be expanded. These changes are relevant to foreign residents disposing of Australian property, infrastructure and interests in entities holding Australian real property.
There is no grandfathering for existing assets and these reforms will apply to CGT events occurring on or after 1 October 2026.
The amendments introduce a statutory definition of “real property” into income tax law. The new definition includes:
- any interest in or right over land (regardless of State or Territory law treatment);
- a personal right to call for or be granted any interest in or right over land;
- a licence or contractual right exercisable over or in relation to land;
- a thing (or combination of things) that is fixed or installed on land (including things that may not be considered fixtures at common law or in State or Territory law);
- a lease of such a thing; and
- a licence or contractual right exercisable over such thing.
The amendments also broaden the definition of taxable Australian real property (TARP) and confirm that water entitlements in relation to Australian water resources are TARP.
The principal asset test which is relevant in determining whether an interest in an entity is an indirect Australian real property interest (IARPI), will also change. The current point-in-time test will be replaced with a 365-day testing period. Broadly, if an entity’s assets were primarily TARP at any point during the 365 days prior to the CGT event, the interest may be treated as taxable Australian property (TAP).
The new laws affect CGT withholding obligations of foreign resident vendors who dispose of an asset valued at $50M or more (using an aggregated value) and provide a non-IARP interest declaration. Foreign resident vendors must notify the ATO that they are providing a vendor declaration at least 28 days before completion (unless the completion period is less than 31 days in which case the notification must be made as soon as reasonably practicable).
The Bill introduces a temporary 50% CGT discount for eligible non-individual foreign residents disposing “Australian renewable energy assets”. The renewable energy discount applies to CGT events occurring from 1 October 2026 to 1 July 2040.
This article is provided for general information only. It should not be regarded as legal or tax advice. If you require advice about how these changes may affect you, please contact our firm.