What’s Proposed in the Foreign Resident CGT Reform
On 10 April 2026, the Australian Treasury released draft legislation to strengthen the foreign resident capital gains tax (CGT) regime. The changes aim to extend CGT to foreign residents disposing of assets with close economic connection to Australian land and natural resources. Proposals include:
- Defining "real property" in statutory terms.
- Expanding the scope of Taxable Australian Real Property (TARP).
- Changing the principal asset test.
- New vendor notification obligations for large transactions.
- Retrospective amendments dating back to 2006 concerning interactions with state laws and improvements on land and fixed assets.
- A notable addition: a 50% CGT discount for foreign residents investing in renewables, valid for a 4-year transitional period, to support the energy transition. (pwc.com.au)
These amendments are still in the draft stage; the comment period ended 24 April 2026. They are not yet law. (pwc.com.au)
Why Digital Nomads / International Investors Should Care
| Situation | Possible Impact Under Reform |
|---|---|
| Disposing overseas real estate or shares of a land-backed property trust | Might be considered taxable TARP; foreign resident CGT kicks in. |
| Buying renewable energy assets in Australia | Could benefit from 50% CGT discount for foreign investors under transition rules. |
| Having property with “improvements” or fixed structures | Such features may make the property more closely connected to Australia for CGT purposes. |
What You Can Do Now to Prepare
- Review your investment structures: trusts, companies, or holding vehicles may need rethinking depending on nationality and residency.
- Keep records of asset improvements, purchases, and alterations made historically—especially those fixed or structural. These may affect retrospective aspects.
- Stay current with state and territory severance laws and how they interact with federal CGT regime.
- Seek advice if disposing of Australian land or natural-resource-tied assets—foreign sales could become taxable where previously they were not.
What’s Not Yet Clear & Next Steps
- How wide the definitions of land, “fixed improvements”, and principal assets will be.
- How vendor notification obligations will be enforced and penalties if they fail.
- How tax treaties might mitigate or complicate these changes.
- Whether the 50% discount for renewables investors will apply only to qualifying assets or more broadly.
Case Example
Suppose you’re a digital nomad with foreign residency, owning an Australian coastal property with solar panels (fixed improvements) and undeveloped land. Under the new rules:
- These improvements may cause the whole property to fall under broadened TARP.
- Disposing of the property could trigger full CGT obligations, including retrospective elements.
- If part of energy-transition (solar infrastructure), you may access the proposed CGT discount.
These reforms, when enacted, will give foreign investors less opportunity to avoid CGT for land-related disposals. Keep a close eye on formal passage of the law, and assess existing and future investment decisions accordingly.