Australia Introduces Foreign Resident CGT Reform Bill

On 2 July 2026, the Australian Government introduced the Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026 into Parliament.

One schedule of the Bill proposes significant changes to Australia’s foreign resident capital gains tax regime.

The reforms were first announced in the 2024–25 Federal Budget and were later developed through Treasury consultations in 2024 and an exposure draft released in April 2026.

The Bill has not yet become law and may still be amended during the parliamentary process.

What Is the Reform Trying to Change?

Foreign residents are currently generally subject to Australian capital gains tax only when they dispose of assets that are classified as taxable Australian property.

This ordinarily includes:

• direct interests in Australian land
• mining and related rights
• certain indirect interests in entities whose value is principally derived from Australian real property
• certain assets used through an Australian permanent establishment

The Bill proposes to broaden the meaning of real property and taxable Australian property.

The expanded definition may capture a wider range of assets and rights with a close economic connection to Australian land, including certain licences, contractual rights, infrastructure and equipment fixed or installed on land.

As a result, the changes are relevant not only to residential property owners but also to foreign investors in infrastructure, energy, mining, telecommunications and other land-connected assets.

The Broad Retrospective Proposal Has Been Removed

The April 2026 exposure draft proposed applying the expanded rules to certain CGT events dating back to 12 December 2006.

That aspect of the proposal attracted significant criticism and has not been retained in the Bill introduced to Parliament.

The expanded rules will generally apply prospectively from the Bill’s commencement date.

However, this does not mean all existing investments are excluded.

An asset acquired before commencement may still fall within the expanded rules if it is disposed of after commencement.

The proposed principal asset test also includes a 365-day lookback period, meaning the asset composition of an entity may need to be examined over the year before a disposal.

Who May Be Affected?

The reforms may affect a person or entity that is a foreign resident for Australian tax purposes when a relevant CGT event occurs.

Potentially affected taxpayers include:

• foreign resident individuals
• Australian citizens or permanent residents living overseas who are foreign residents for tax purposes
• temporary visa holders who are treated as foreign residents for tax purposes
• foreign companies, trusts and investment funds
• investors holding indirect interests in Australian land-rich entities
• foreign investors in infrastructure, renewable energy, mining and related assets
• parties involved in large transactions with foreign resident vendors

Immigration status and tax residency are separate legal concepts.

Holding an Australian permanent visa does not automatically make a person an Australian tax resident. Similarly, holding a temporary visa does not automatically make a person a foreign resident.

Individual tax residency may depend on the ordinary concepts, domicile, 183-day and Commonwealth superannuation tests, together with any applicable tax treaty.

Key Changes Proposed by the Bill

Expanded Definition of Real Property

The Bill proposes a broader statutory definition of real property.

It may include interests and rights over land, certain contractual or licence rights relating to land, and things fixed or installed on land even where they are not legally classified as fixtures.

Changes to the Principal Asset Test

The principal asset test is used to determine whether an interest in an entity is principally attributable to Australian real property.

The Bill proposes a 365-day testing period. This may require taxpayers to examine whether the relevant entity exceeded the 50% Australian real property threshold at any time during the preceding year.

Treaty Override

The Bill retains provisions intended to preserve Australia’s taxing rights where certain tax treaties might otherwise restrict the application of the expanded domestic CGT rules.

The operation of these provisions will depend on the wording of the relevant treaty and the taxpayer’s circumstances.

New Notification and Withholding Procedures

The Bill proposes new notification, declaration and withholding requirements for certain large transactions involving possible indirect Australian real property interests.

Where a foreign resident vendor proposes to dispose of an interest worth AUD 50 million or more and considers that it is not an indirect Australian real property interest, the vendor may be required to notify the Australian Taxation Office.

Failure to comply with the proposed procedures may result in the purchaser being required to withhold 15% of the purchase price and may expose parties to significant penalties.

These proposed changes should not be confused with the existing foreign resident capital gains withholding rules that already apply to many direct Australian property transactions.

Renewable Energy Transitional Relief

The Bill also contains a transitional 50% CGT discount for certain qualifying Australian renewable energy assets disposed of before 1 July 2030.

The concession is subject to detailed eligibility requirements and may not cover every asset forming part of a renewable energy project.

When Would the Changes Begin?

The Bill is not yet law.

The relevant provisions are proposed to commence on the first 1 January, 1 April, 1 July or 1 October following Royal Assent.

Based on the current parliamentary timetable, 1 October 2026 may be the earliest possible commencement date, but the final date will depend on when and in what form the Bill passes Parliament.

What Property Owners and Investors Should Do

Taxpayers potentially affected by the reforms should:

• confirm their Australian tax residency status
• identify whether their assets are currently taxable Australian property
• assess whether the expanded real property definition could capture additional assets or rights
• review indirect interests held through companies, trusts or investment structures
• retain valuation and ownership records relevant to the proposed 365-day principal asset test
• monitor the Bill’s progress and final commencement date
• obtain Australian tax advice before signing a sale agreement or restructuring an investment

Advice should be obtained from an Australian registered tax agent or tax lawyer with experience in foreign resident CGT.

Key Takeaways

The foreign resident CGT reforms were introduced to Parliament on 2 July 2026 but have not yet become law.

The proposal to apply the expanded rules to disposals dating back to 2006 has been removed.

Existing assets may still be affected if they are disposed of after the new rules commence.

The Bill significantly broadens the proposed meaning of real property and may affect infrastructure, energy and other land-connected investments, not only residential property.

A proposed 365-day principal asset test and new large-transaction notification and withholding rules may increase compliance obligations.

Visa status does not determine tax residency.

Foreign resident property owners and investors should obtain specialised Australian tax advice before disposing of affected assets.

The content of this article is intended for general informational purposes only and does not constitute legal advice. Immigration law is complex and subject to change. The information provided may not reflect the most current legal developments. For advice specific to your circumstances, please consult a registered Australian migration lawyer. For full terms governing use of this website and its content, please refer to our Website Terms and Conditions.

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