The federal government’s foreign resident CGT reforms will no longer include a contentious 20-year retrospective reach.
The federal government has modified its planned overhaul of the foreign resident capital gains tax regime, dropping proposals that would have applied new rules to transactions dating back to 12 December 2006.
The exposure draft released in April 2026 sought to broaden the Australian CGT base for foreign investors and to backdate those changes almost two decades, prompting warnings from industry bodies about tax certainty and investor confidence.
Under the revised bill, that retrospectivity has been abandoned, and the expanded regime will apply only prospectively to CGT events occurring on or after the legislation’s commencement.
As part of the pivot, the bill hard‑wires protections that limit the Australian Taxation Office’s (ATO) ability to revisit historic foreign resident CGT assessments outside normal amendment periods.
Historical positions can now only be reopened under standard fraud or evasion provisions or where a transaction was already under formal audit, objection, or appeal before 10 April 2026.
CPA Australia tax lead Jenny Wong said the amended legislation struck a better balance between integrity and certainty.
“This is a significant and welcome outcome. The exposure draft would have retrospectively rewritten the tax treatment of transactions going back almost two decades,” Wong said.
“CPA Australia said that was disproportionate and damaging to investor confidence, and the government has responded.”
Wong also said that codifying the protections in legislation was critical for long‑term tax trust.
“The measures will now apply prospectively, which is the right answer. Importantly, the protections are written into the law itself. Taxpayers won’t have to rely on administrative discretion – the Bill expressly prevents historical assessments being reopened outside the normal amendment periods. That’s the legislative certainty we asked for,” she said.
Foreign CGT net still tightened
While the backdated element has been removed, the government is pressing ahead with a broader foreign resident CGT regime that will reshape the treatment of future transactions in property, infrastructure, and energy.
The definition of “taxable Australian real property” is being widened so that the concept of real property is determined under Commonwealth law and extends more clearly to long‑lived infrastructure, mining, energy, and data centre assets.
At the same time, the principal asset test for indirect holdings of Australian real property will move from a point‑in‑time assessment at the date of the CGT event to a 365‑day testing period.
A 50 per cent CGT discount will apply to disposals of certain renewable infrastructure from the first quarter after royal assent until 30 June 2030, designed to keep global capital engaged in large‑scale wind, solar, and storage assets.
Investor confidence and housing pipeline in focus
The Property Council of Australia, which had said that retrospective tax changes risked undermining Australia’s reputation as a stable destination for global capital, welcomed the government’s decision.
Property Council CEO Mike Zorbas said the decision restored a sense of predictability for investors whose funding underpins housing and infrastructure delivery.
“This policy pivot is a win for commonsense. Australia relies on long‑term investment to build homes, infrastructure and the assets that support economic growth,” he said.
“Applying new tax rules to transactions completed two decades ago would have spooked the international investors we need to help build tomorrow’s Australia.”
[Related: HOUSING TAX REFORMS: The latest updates]
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