Australia: Guide on changes to foreign resident capital gain tax
Effective October 1, 2026
Following the Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026 receiving Royal Assent, the Australian Taxation Office (ATO) provided a guide on changes to the foreign resident capital gains tax (CGT) regime effective October 1, 2026. The guide provides that:
- Foreign vendors providing a non-indirect Australian real property interest declaration to a purchaser for an asset disposal (including related transactions) of AU$50 million or more must complete a form to notify the ATO.
- 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 will be a new definition of real property under Commonwealth law.
The changes do not apply retroactively to settled disposals, but the point-in-time principal asset test will become a 365-day testing period, and a temporary 50% CGT discount will be in place for eligible non-individual foreign residents disposing of certain renewable energy assets.
The ATO plans to publish additional information before October 1, 2026, on:
- High-level changes that may affect the tax paid on direct and indirect investments in Australian real property.
- When to notify the ATO when disposing of shares and other membership interests over AU$50 million.
The ATO is also considering if additional formal public advice and guidance are needed, which may further clarify the real property definition and how the updated principal asset test and renewable energy asset discount will apply.
In addition, the ATO registered a legislative instrument (Taxation Administration (PAYG Withholding Variation for Foreign Resident Capital Gains Withholding Payments) Legislative Instrument 2026) that consolidates and replaces (apart from amendments to the evidentiary requirements relating to acquisitions from income tax exempt entities) five existing class variation legislative instruments to make it easier to identify whether a foreign resident capital gains withholding (FRCGW) class variation applies.