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The proposed changes, first flagged in the 2024–25 budget, are aimed at resolving longstanding uncertainty and ensuring foreign investors pay tax on assets “with a close economic connection to Australian land and our natural resources.”
Under the draft, capital gains tax (CGT) will apply to foreign investors selling assets tied to Australian land and natural resources.
The government said the reforms are intended to ensure foreign investors “pay a fair share of tax in Australia” while providing clarification for investors as to how the rules apply in practice.
As part of the consultation process, which is currently ongoing, a time-limited, targeted concession will be introduced within the foreign resident CGT regime to support investment in the renewables sector.
The concession is designed to balance support for clean energy investment with the longer-term objective of aligning the tax treatment of these assets with other asset classes.
The draft legislation also includes targeted amendments applying to investments dating back to the regime’s introduction in 2006, clarifying that state and territory laws – including severance provisions in property law – do not determine which assets fall within scope.
The absence of a clear definition of real property, combined with interactions across different jurisdictions, has contributed to uncertainty, which the proposed changes seek to address.
The reforms also bring Australia’s tax framework more closely into line with OECD model rules for taxing foreign residents and align treatment between foreign and domestic investors.
Clarifying the interaction with state and territory laws is intended to ensure consistent CGT treatment regardless of where assets are located, reinforcing the original policy intent.
The changes will ensure foreign residents disposing of interests in large-scale infrastructure assets fixed to Australian land – including buildings and energy, transport, and telecommunications assets – are subject to CGT.
The government said the measures are designed to protect revenue and support broader efforts to improve tax fairness and budget sustainability.
Consultation on the draft legislation is open until 24 April 2026. You can leave feedback here.
[Related: CGT discount reform could trigger investor sell-off]
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