Australia has enacted changes that broaden the capital gains tax (CGT) rules applying to foreign residents from 1 October 2026.
The reforms expand the range of Australian land and land-based infrastructure treated as taxable Australian real property (TARP). They also increase potential CGT and withholding exposure on disposals of shares or units in Australian asset-rich entities.
A foreign resident is generally subject to Australian CGT where the asset is Australian real property, an indirect interest in Australian real property or another asset covered by the Australian CGT rules.
Broader definition of real property
The new definition includes:
- Interests or rights over land, regardless of their classification under State or Territory law.
- Things fixed to or installed on land and expected to remain there for most of their useful life.
Examples include wind turbines, solar panels, battery storage systems, mining equipment and transmission networks.
Practical implications
Foreign residents disposing of infrastructure, resources or project-company interests should review the asset classification and TARP position before completion. An Australian tax review can identify potential CGT exposure and coordinate the analysis with overseas advisers and transaction teams.
How we can assist
We can review the proposed transaction, assess the TARP and CGT position and provide Australian tax advice to support the vendor, purchaser and their overseas advisers.
Indirect interests and the 365-day look-back
The principal asset test now considers whether an entity’s assets were principally Australian real property at any time during the 365 days before disposal, rather than only on the disposal date.
Practical implications
The look-back period increases the risk that share or unit disposals, including internal restructures, may be taxable in Australia. An early Australian CGT and withholding review is advisable where the entity’s asset composition has changed during the preceding year.
How we can assist
We can undertake a historical asset review, apply the 365-day test and advise whether a proposed disposal or restructure requires further CGT or withholding analysis.
Withholding on transactions of AUD 50 million or more
For transactions valued at AUD 50 million or more:
- A vendor must notify the ATO before completion if it would otherwise provide a “not TARP” declaration.
- A purchaser must consider whether it could reasonably suspect that the declaration is incorrect.
Practical implications
Purchasers may adopt a more cautious approach to vendor declarations, increasing the need for due diligence and withholding protections. An Australian tax review can help assess the declaration, determine whether ATO engagement is required and support the transaction timetable.
How we can assist
We can review vendor declarations, assist with ATO notifications and clearance matters, and advise on potential withholding and completion requirements.
Renewable energy CGT discount
A 50% CGT discount applies to foreign residents disposing of eligible Australian renewable energy assets, and certain interests in entities holding those assets, where the CGT event occurs between 1 October 2026 and 1 July 2040.
The measure may apply to qualifying wind, solar, storage and related assets, subject to eligibility requirements. The end date was previously announced as 1 July 2030.
Practical implications
The eligibility requirements should be reviewed before relying on the discount. An Australian tax adviser can assess the assets, ownership structure and transaction, model the potential benefit and document the position taken.
How we can assist
We can assess eligibility for the discount, model the potential tax outcome and document the supporting analysis for the group and its overseas advisers.
No retrospective application
The expanded TARP definition applies prospectively from 1 October 2026. The Budget proposal for retrospective application back to 2006 was not enacted.
