Tax Planning
How the Non-Resident CGT Reforms Could Affect Foreign Owners of Australian Assets
Budget-announced changes to the foreign resident CGT regime—coming into effect from 1 July 2025—alter who pays CGT in Australia and under what rules for indirect asset sales.
By NomadicTax Research Team • 6 min read • September 5, 2026
## What Are the Non-Resident CGT Reform Measures?
These reforms, announced during the 2025 Budget and slated for assets sold on or **after 1 July 2025**, aim to tighten Australia’s capital gains tax (CGT) rules for foreign residents. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b12d922f-3ffe-47a6-a868-289919bcf50a?utm_source=openai)) Key features include:
- **Broader asset coverage**, capturing direct and indirect assets with a close economic connection to land (including certain shares/membership interests). ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b12d922f-3ffe-47a6-a868-289919bcf50a?utm_source=openai))
- Requirement for **foreign residents disposing of shares or membership interests worth over AUD 20 million** to notify the ATO before executing transactions. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b12d922f-3ffe-47a6-a868-289919bcf50a?utm_source=openai))
- Changes to the **point-in-time principal asset test**, requiring a 365-day testing period. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b12d922f-3ffe-47a6-a868-289919bcf50a?utm_source=openai))
## Who Is Affected & What Counts as “Foreign Resident CGT Asset”?
- Any Australian real property or interest in land owned directly or via an entity—such as shares—that meet the tests mentioned above. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b12d922f-3ffe-47a6-a868-289919bcf50a?utm_source=openai))
- Thresholds apply, particularly for indirect interests and value in excess of the AUD 20 million requirement. Small indirect interests may still fall below the reporting threshold.
## Real-World Examples
- **Foreign company owning shares in land-rich Australian companies**: If the company owns shares in a business whose value is largely derived from Australian real property, these reforms could lead to CGT obligations when disposing of those shares—even if there is no physical disposal of land.
- **Foreign individual selling shares in Australian entity**: If that person holds shares worth over AUD 20 million, they must notify the ATO prior to completing the sale to ensure compliance.
## Implications for Planning & Structuring
- **Valuation strategies** become absolutely critical now. Sellers of indirect interests must assess whether their shares are principally derived from Australian real property.
- Holding periods: the 365-day principal asset test means that ownership duration post-acquisition is tactical for determining exposure.
- Compliance: Failure to notify the ATO before high-value disposal could result in penalties and unanticipated tax exposure.
## Timing & Status
These reforms **are not yet law**, meaning — while the broad framework has been announced — legislative details and enabling regulations are outstanding. The announced **effective date** for the CGT events is **1 July 2025**. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b12d922f-3ffe-47a6-a868-289919bcf50a?utm_source=openai))
## Practical Tips for Foreign Investors
- Before acquiring assets or shares, determine whether the asset meets the *principal asset test* and whether it would be considered “taxable Australian property.”
- If planning a sale over AUD 20 million, allow time for notification to ATO well before execution of the transaction.
- Work with tax advisors to structure entities and ownership in ways that reduce exposure where possible (e.g., where value is not principally derived from land).
- Watch for legislative and regulatory updates — rules may shift in consultative phase.
This reform underscores Australia’s tightening of scrutiny on foreign ownership and CGT liabilities. Foreign investors should incorporate CGT risk into due diligence and tax planning now — and stay alert to when the law is finalized.