The government's Strengthening the Foreign Resident Capital Gains Tax regime measure has received royal assent and will come into effect from 1 October 2026.
The changes to the foreign resident CGT regime are intended to:
- improve its integrity
- provide greater certainty on which Australian assets are subject to tax.
The changes apply to disposals of Australian:
- real property
- real property interests (through shares, trust units or other membership interests).
Read the overview below and consider if any foreign resident clients may now be subject to CGT, especially in relation to:
- water entitlements
- investments where state or territory severance provisions may have applied
- investments in Australian companies and other entities.
Summary of changes
From 1 October:
- Foreign vendors providing a non-IARP interest declaration to a purchaser for an asset disposal (including related transactions) of $50 million or more must complete a form to notify us.
- Purchasers must now consider if, at any time between when they receive a declaration from a vendor and settlement, they reasonably believe a declaration is false.
- There’ll be a new definition of real property under Commonwealth law that includes:
- land
- rights and interests relating to land
- assets fixed to land
- leases or licences over those assets.
This won’t apply retrospectively to settled disposals.
- The point-in-time principal asset test will become a 365-day testing period.
- A temporary 50% CGT discount will be in place for eligible non-individual foreign residents disposing of certain renewable energy assets.
Guidance and consultation
We’re preparing the new notification form, which will then be available to download from our website and submit to us via email. You'll be able to submit the form on behalf of a client.
Before the new rules commence on 1 October, we'll publish the following information:
- the high-level changes that may affect the tax paid on direct and indirect investments in Australian real property
- covering when your clients should notify us when they're disposing of shares and other membership interests over $50 million.
We're also considering if formal public advice and guidance (PAG) products are required to support the new rules. We’ll work with our relevant stewardship groups to develop any draft PAG and then seek your feedback via public consultation.
Later guidance may further clarify:
- the real property definition
- how the updated principal asset test will work
- how the renewable energy asset discount will apply.
We'll keep you updated through the Tax professionals newsroom and Tax and BAS agents newsletter.