New rules broaden the scope of taxable Australian property, extend the principal asset test to 365 days, and introduce notification requirements for large disposals, while providing a transitional 50% CGT discount for eligible renewable energy assets.
The Australian Taxation Office (ATO) announced on 23 September 2026 that it implemented changes to how foreign residents pay capital gains tax on Australian property investments. The Strengthening the Foreign Resident Capital Gains Tax regime received royal assent and will take effect on 1 October 2026.
Under the Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Act 2026, the amendments broaden the scope of taxable Australian real property by introducing a new definition of real property and including water rights. They also require the principal asset test to be assessed over the 365 days before a CGT event, rather than only at the time of the event.
In addition, certain foreign resident vendors will face new notification requirements when declaring that membership interests are not indirect Australian real property interests. A transitional 50% CGT discount will also be available to eligible foreign residents disposing of certain Australian renewable energy assets.
The overhaul aims to close gaps in the existing system and provide clearer rules about which foreign-owned assets face Australian taxation. The changes apply to direct and indirect investments in Australian real property and real property interests held through shares, trust units, or other ownership structures.
New notification requirements for large disposals
From 1 October 2026, foreign sellers who declare they are not Australian residents when disposing of assets worth AUD 50 million or more must complete and submit a notification form to the tax authorities. This applies to the sale itself and related transactions. The form will be available for download from the tax office website and submitted by email.
For assets other than taxable Australian real property, vendors can provide declarations to confirm that foreign resident capital gains withholding (FRCGW) does not apply. Australian resident vendors can use a residency declaration, while foreign resident vendors may provide a declaration that a membership interest is not an indirect Australian real property (IARP) interest. For taxable Australian real property, Australian tax residents generally need an ATO clearance certificate to prevent the purchaser from applying the 15% withholding requirement.
Buyers now carry an additional responsibility under the new regime. They must check whether any non-resident declaration provided by a seller appears false or unreliable at any point between receiving the declaration and settlement. This places due diligence obligations on purchasers and creates accountability throughout the transaction lifecycle.
Expanded property definition and testing rules
The tax authorities have introduced a new legal definition of real property under Commonwealth law. This definition includes land itself, rights and interests attached to land, structures and fixtures fixed to land, and leases or licences granted over these assets.
An important change affects how foreign residents qualify for the principal asset exemption. The existing point-in-time test will expand to a 365-day testing period, giving the authorities a fuller picture of how long someone held the asset as their main residence.
These changes do not apply to disposals that have already been completed and settled.
Guidance being prepared
The tax authorities plan to release high-level summaries of how these changes affect different types of investors before 1 October 2026. Additional technical guidance will address how the updated property definition works, how the 365-day principal asset test applies, and how the renewable energy discount operates in specific scenarios.
