Australia’s Senate has passed legislation broadening the foreign resident capital gains tax regime, including an expanded definition of taxable Australian real property, a 365-day lookback test and a 50% CGT discount for eligible renewable energy assets.
The Australian Senate passed the Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026 on 10 September 2026, a legislative proposal from the Australian Parliament designed to increase oversight within the financial and tax sectors.
The bill proposes enhancements to the foreign resident capital gains tax regime and implements critical updates to the merger primary law framework under competition policy.
The reform to Australia’s foreign resident capital gains tax (CGT) framework is enacted through Schedules 2 and 3 of the Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026.
Broadened definition of real property and connected infrastructure (Schedule 2)
The legislation amends section 995-1(1) of the Income Tax Assessment Act 1997 to introduce a comprehensive statutory definition of real property. The definition covers interests and rights over Australian land, contractual and personal rights relating to land, and fixed or installed infrastructure regardless of its classification under State or Territory law.
It also includes leases, licences, and contractual rights over such assets. Section 855-20 further treats water entitlements, options, and rights to acquire covered real property as taxable Australian real property. Mining, quarrying, or prospecting information relating to an area in Australia is also included for the principal asset test.
Strengthened indirect interest rules: 365-day lookback test (Schedule 2)
The legislation strengthens the indirect interest rules by introducing a 365-day lookback period for the principal asset test. A foreign resident’s disposal of an entity interest may be taxable if the entity met the test either at the time of disposal or at any point during the preceding 365 days, preventing temporary restructuring or dilution of assets before a sale from avoiding tax.
Renewable energy concession & 50% CGT discount (Schedule 3)
Schedule 3 introduces a 50% CGT discount for foreign resident entities and foreign trusts on gains from eligible Australian renewable energy assets or qualifying membership interests. An interest qualifies where the entity’s Australian renewable energy assets are worth at least three times its other taxable Australian real property assets. The concession applies to CGT events from commencement until 30 June 2040.
Commencement and application rules
The Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026 will become law upon receiving Royal Assent.
Schedules 1, 2, and 3 will commence on the first 1 January, 1 April, 1 July, or 1 October following Royal Assent. The foreign resident CGT amendments apply prospectively to CGT events occurring on or after commencement, including disposals of existing holdings. Earlier tax assessments generally cannot be amended retrospectively, except in limited circumstances such as fraud, evasion, or prior objections.
