The Australian tax changes which significantly expand the scope of the Australian capital gains tax (CGT) for non-residents were enacted on 15 September 2026, with a commencement date of 1 October 2026.
Consistent with the Government messaging since the May 2024 Federal Budget, there is no grandfathering for pre-existing assets (for example, assets acquired prior to the May 2024 Federal Budget announcement). However, the proposed "retrospective" change to the meaning of "real property" which was first tabled in the 10 April 2026 exposure draft did not make it into the final legislation, and the transitional 50% CGT concession for certain renewable energy assets included in that exposure draft has been retained (but with the transitional period extended to 30 June 2040).
The main enacted changes to the CGT regime for non-residents significantly expand what was generally understood to be the meaning of real property and in doing so overturn two Federal Court decisions. The amendments broaden the definition of taxable Australian real property (TARP) by introducing a statutory definition of "real property" into Australia’s income tax law, applicable to CGT events occurring on or after 1 October 2026.
The new definition of "real property" includes:
- any interest in or right over land (regardless of State or Territory law treatment) and personal rights to call for or be granted such interests;
- a licence or contractual right exercisable over or in relation to land; and
- things fixed or installed on land (regardless of whether they are fixtures at common law or treated in any other way under State or Territory law) together with a lease of such thing, or licence or contractual right exercisable over such thing.
This will bring within scope assets not considered fixtures of the taxpayer at common law – such as wind turbines, solar panels, batteries, mining equipment and electricity transmission networks – as well as assets statutorily severed from underlying real property.
The changes also expand the testing time for the principal asset test, from the previous time of the CGT event (a point in time test), to any time during the 365 days that precede the time of the CGT event.
The accompanying changes to the International Tax Agreements Act 1953 is intended to ensure that to the extent a tax treaty with Australia provides that the expression real property or immovable property has the same meaning it has under the law of Australia for the purpose of that agreement, then that expression means taxable Australian real property (which as noted above incorporates the new definition of real property).
The new legislation includes a 50% CGT discount for CGT events in respect of "Australian renewable energy assets" and membership interests in entities that pass the "renewable energy asset test", provided that the CGT event occurs between 1 October 2026 and 1 July 2040.
The new law also amends the foreign resident CGT withholding rules for transactions with consideration of AUD50m or more (with aggregation with related transactions) where the vendor provides a declaration to the purchaser that a CGT asset is a membership interest which is not an indirect Australian real property interest. In these circumstances there is an obligation on the part of the vendor to notify the ATO that they are providing a vendor declaration at least 28 days before completion (except that if the period between the transaction being entered into and completion is not more than 31 days, the notification to the ATO must be made as soon as reasonably practicable after the transaction has been entered into) and the purchaser can only rely on the declaration if at no time during the period starting when the purchaser is given the declaration and ending immediately before completion, the purchaser knows, or could reasonably be expected to know, the declaration to be false.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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