Australia: KPMG comments on draft legislation to strengthen capital gains tax rules for foreign residents
Including that any retroactive application of draft legislation is unwarranted
april 28, 2026
The government on April 10, 2026, released for consultation draft legislation that would introduce a new expanded definition of real property for purposes of determining “taxable Australian real property” (TARP)—with respect to which nonresidents are potentially subject to capital gains tax (CGT).
The amendments are generally proposed to apply on a prospective basis, but the expanded definition of real property would apply retroactively to CGT events occurring on or after December 12, 2006.
In response to the request for comments, KPMG tax professionals provided a submission making the following key points:
- Any retroactive application of the draft legislation represents a departure from established legislative practice and is difficult to reconcile with fundamental principles of legal certainty, predictability, and finality in tax administration. In any event, retroactivity should be limited to CGT events occurring after May 2024, when the policy change was first announced.
- Several of the proposed inclusions of the expanded real property definition are overly broad, and further refinement and clarification are required to avoid unintended outcomes and disputes.
- A transitional CGT discount should be provided for all affected asset classes, not just Australian renewable energy assets. To the extent transitional relief is limited to renewable energy assets, it should be expanded to enhance progress in the energy transition, including revised start and end dates, and expansion of in-scope assets. Amendments also should made to the managed investment trust rules to accommodate and incentivize renewable investment.
- The proposed 365‑day principal asset test for “indirect Australian real property interests” (IARPIs) will impose a significant compliance burden, and simplifications, safe harbors, and an anti‑overlap mechanism to avoid double taxation should be included.
- Further consultation on revised draft legislation is warranted given the complexity and significance of the proposed amendments.