Australia has opened a public consultation on draft reforms to its foreign resident capital gains tax regime, including a proposed 50% transitional CGT discount for eligible renewable energy asset disposals until 2030. The measures aim to strengthen tax rules for foreign investors while supporting continued investment in Australia’s energy transition.
The Australian Government has opened a public consultation on draft legislation to reform the foreign resident capital gains tax (CGT) regime, with the consultation running from 10 to 24 April 2026. The proposed law is designed to ensure foreign residents pay their fair share of tax in Australia while providing greater certainty for foreign investors on how the updated rules will apply.
The consultation builds on measures first announced in the 2024–25 Budget and follows feedback received during an earlier consultation process held between July and August 2024.
The draft legislation includes a significant transitional concession for the renewable energy sector: a 50% CGT discount for eligible foreign residents disposing of certain Australian renewable energy assets. The discount will apply from the commencement of the legislation until 30 June 2030, offering time-limited relief aimed at supporting continued foreign investment during Australia’s energy transition.
Under the proposed amendments, the discount would apply to foreign residents other than individuals, including corporate entities and trustees of foreign trusts, where a CGT event relates to either a direct Australian renewable energy asset or an eligible indirect interest in such an asset.
The Government said the measure responds to stakeholder requests for transitional relief and is intended to help investors incorporate future tax costs into their investment models before the longer-term tax settings take full effect.
The explanatory notes define an Australian renewable energy asset as taxable Australian real property whose primary purpose is generating, or directly facilitating the generation of, electricity in Australia using an eligible renewable energy source under the Renewable Energy (Electricity) Act 2000. This includes assets already in operation as well as projects under construction, temporarily dormant, or in development where objective evidence demonstrates a genuine renewable energy purpose.
The draft law also extends the concession to certain indirect disposals, such as shares or units in entities holding renewable infrastructure. To qualify, at least 90% of the value of the entity’s taxable Australian real property must be attributable to renewable energy assets, ensuring the relief remains tightly targeted at renewable infrastructure investments.
The draft legislation further introduces integrity rules to prevent artificial inflation of renewable asset values and double counting within corporate groups. These provisions are intended to ensure the concession reflects genuine economic exposure and cannot be used for tax planning arrangements that distort asset valuations.
The broader reform package also updates the foreign resident CGT framework by clarifying which assets are taxable, refining the scope of Australian real property, and in some cases applying clarifications retrospectively from 2006.
According to the Government, these longer-term settings are more closely aligned with OECD Model Tax Convention principles and the treatment of Australian companies under domestic CGT rules.
The renewable energy discount is positioned as a transitional measure that will sunset in 2030, after which foreign investors will move to the strengthened permanent regime introduced under the Budget reforms. The Government says that this strikes a balance between safeguarding the tax base and maintaining investment momentum in Australia’s renewable energy sector.
Stakeholders are now invited to provide feedback on the draft legislation before the consultation closes on 24 April 2026.
