Australia: Consultation on draft legislation to strengthen capital gains tax rules for foreign residents
Consultation closes April 24, 2026.
The government on April 10, 2026, released for consultation draft legislation that would introduce the following 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):
- Any interest in or right over land (regardless of how that interest or right is treated for the purposes of any state law or territory law)
- Personal right to call for or be granted any interest in or right over land
- License or contractual right exercisable over or in relation to land
- Thing (or combination of things) that is fixed or installed on land and is, or is reasonably expected to be, situated on the land for the majority of its useful life (whether or not it is a fixture, or treated in any other way, for the purposes of any state law or territory law or at general law)
- Lease of, or license of contractual right exercisable over, a thing mentioned immediately above
A key change in the expanded definition is that the distinction between fixtures and chattels under general law or state law is no longer relevant. Mere installation of an asset on land (e.g., placed in position for use) would be sufficient for the asset to be real property. Furthermore, the expanded definition ignores severance legislation.
The draft legislation would also change the principal asset test, under which “indirect Australian real property interests” (IARPI)—defined as non-portfolio membership interests (e.g., shareholdings of more than 10%) if more than 50% of the underlying entity's market value is derived from TARP—from a point-in-time test, at the time of the CGT event (e.g., time of sale of shares that are IARPI), to a 365-day testing period (i.e., 365 days preceding the CGT event).
Limited transitional relief in the form of a 50% CGT discount is proposed for CGT events in relation to Australian renewable energy assets until June 30, 2030.
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.
The consultation closes April 24, 2026.
For more information, contact a KPMG tax professional in Australia:
Matt Ervin | mattervin@kpmg.com.au
Shirley Lam | slam1@kpmg.com.au
Katrina Piva | katrinapiva@kpmg.com.au