Following the release of Exposure Draft legislation on 10 April 2026 (see our previous alert here), on 2 July 2026 the Government introduced the Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026 into Parliament.
The Bill represents the most significant expansion of Australia’s foreign resident CGT regime in many years.
The Bill largely retains the Government's proposed expansion of the foreign resident CGT regime, including the introduction of a statutory definition of real property, a 365-day Principal Asset Test (PAT), enhanced withholding rules, and a temporary CGT concession for certain renewable energy investments. However, a number of important changes have been made – including removal of the retrospective application of certain elements of the expanded Principal Asset Test (PAT) – in response to stakeholder feedback received during the consultation process.
While there is no longer ‘retrospective’ application of measures, there is also no grandfathering – so assets acquired under the old definition will still be subject to the new definition on sale. Additionally, the Bill seeks to limit the ATO’s ability to amend a prior year assessment in certain circumstances unless the foreign resident taxpayer has lodged an amendment request or objection before 10 April 2026
Retrospective application removed
Under the initial draft, three key elements were to apply retrospectively from 12 December 2006, being the definition of interest in land, fixtures, and leases over land and fixtures more generally.
The change in this draft to remove that retrospectivity significantly reduces uncertainty for taxpayers that have undertaken transactions since 12 December 2006 in reliance on the existing framework, and in some cases restores equity for taxpayers that had litigated their positions in court and won (e.g. YTL Power Investments Limited v Commissioner of Taxation [2025] FCA 1317 and Newmont Canada FN Holdings ULC v Commissioner of Taxation (No 2) [2025] FCA 1356).
Retained expanded Principal Asset Test (PAT)
The Bill retains the proposed 365-day testing period that will require taxpayers to consider historical asset values when determining whether an entity meets the PAT, but now introduces a Ministerial discretion to allow alternative testing approaches to be prescribed for certain classes of investors who may not have access to sufficient historical information to apply the test. The PAT is satisfied if the underlying assets derive more than 50 per cent of their market value from taxable Australian real property at any time during the 365 days that precede the CGT event.
Withholding rules continue to be onerous
The retention of the proposed notification regime for transactions of $50 million or more means foreign investors will need to ensure appropriate processes are in place to identify and manage potential withholding obligations early in the transaction. However, the Bill introduces flexibility for exemptions for certain transaction types, and provides additional guidance regarding the level of due diligence expected of purchasers when relying on vendor declarations. These changes will result in increased vendor compliance obligations and increased due diligence requirements for purchasers.
Renewable energy concession expanded
The 50 per cent CGT concession for renewable energy projects has been refined to better accommodate modern renewable energy projects, but still excludes certain infrastructure assets critical to connecting renewable energy to the grid. In particular, the Bill broadens eligibility for energy storage assets and relaxes the indirect asset threshold, making the concession available to a wider range of renewable energy investments. However, it still only applies for a relatively short transition period (until 30 June 2030) and will be of limited benefit to the majority of foreign investors in large-scale projects, which have a much longer project timeframe.
Key considerations for taxpayers
- review existing investment structures and future acquisitions for exposure to the expanded foreign resident CGT regime
- consider how your Australian assets will be classified under the new taxable Australian real property definition
- assess whether sufficient historical valuation information is available to apply the 365-day PAT
- update transaction processes to address the expanded withholding and notification requirements
- consider whether renewable energy investments currently in development may be eligible for temporary CGT concession
- monitor the progression of the Bill through Parliament for any further amendments and commencement date
- seek appropriate tax advice especially before any proposed material transaction.
Overall
While the Government has moderated several aspects of the Exposure Draft in response to consultation, the Bill continues to represent a substantial expansion of Australia’s foreign resident CGT regime. Foreign investors, including private capital groups, infrastructure funds and renewable energy investors, should assess how the proposed changes may affect future transactions and ongoing compliance obligations.
At the time of writing, the Bill has been introduced into Parliament but has not yet received Royal Assent and is not yet law. If enacted in its current form, the measures will commence from the earliest of the first day of the first quarter (i.e. one of 1 January, 1 April, 1 July or 1 October) after Royal Assent.
