Chartered Accountants Australia and New Zealand (CA ANZ) has made a submission to Treasury on the draft legislation and explanatory materials aimed at strengthening Australia’s foreign resident capital gains tax (CGT) regime. The draft legislation consists of Exposure Draft Treasury Laws Amendment Bill 2026: Strengthening the foreign resident CGT regime and Treasury Laws Amendment Bill 2026: Renewable energy asset discount capital gains for foreign residents (draft Bills)

The draft Bills, released almost two years after the 2024-25 Budget announcement, propose significant changes to how foreign residents are taxed on gains from direct and indirect disposals of assets that have a close economic connection to Australian land and natural resources.

CA ANZ is concerned about the short two-week consultation period for the draft Bills The complexity of the proposed amendments and their interaction with other provisions make it difficult for stakeholders to provide comprehensive feedback in such a limited timeframe.

Key points from the CA ANZ submission include:

• The draft Bills introduces a broad definition of “real property”, covering assets with a close economic connection to Australian land and natural resources. CA ANZ recommends aligning this definition with common law concepts of land and fixtures to avoid inconsistent outcomes caused by State and Territory law. CA ANZ proposes creating a new taxable Australian real property (TARP) asset category under section 855-15 of the Income Tax Assessment Act 1997 (ITAA 1997) for assets with a close economic connection to Australian land or natural resources.
• The new definition of “real property” could make some foreign residents’ assets become TARP. CA ANZ recommends a market value cost base reset for these assets to provide transitional relief.
• The draft Bills propose applying the broadened TARP definition retrospectively by almost 20 years. CA ANZ considers this highly unusual and unfair. If the 20-year retrospective change is not abandoned, CA ANZ recommends limiting the application date to four years before the measure commences.
• CA ANZ calls for a compliance saving measure, similar to section 152-40(3A) of the ITAA 1997, so foreign residents are not required to provide daily valuations when applying the principal asset test (PAT). To reduce the risk of double taxation, CA ANZ also recommends excluding the market value of any TARP sold in the previous 365 days from the PAT.
• The draft Bills requires purchasers to judge the accuracy of a vendor’s residency declaration. CA ANZ members are concerned this will lead purchasers to withhold 15% foreign resident capital gains withholding as a precaution, shifting the compliance burden to vendors to obtain refunds. This requirement is unnecessary, given the new ATO notification process for vendors.
• The proposed four-year window for the 50% CGT discount on renewable energy assets may not align with the long project development cycles typical in the sector. Changes are also required to ensure the CGT discount flows through foreign resident trusts.