Reforms will include concession for renewable energy investments
The federal government is inviting feedback on recently released draft legislation that intends to reform the foreign resident capital gains tax (CGT) regime, with this consultation period to close on 24 April 2026.
According to a media release from Jim Chalmers, Australia’s treasurer, the planned legislation aims to address a longstanding area of uncertainty for investors by confirming that CGT applies to foreign investors selling assets with a close economic connection to Australia’s land and natural resources.
Following engagement with the renewable energy sector, the government has worked on reforms that will offer a time-limited, targeted concession in the foreign residents’ CGT regime for clean energy investment.
The treasurer explained that the reforms seek to support clean energy objectives, make foreign investors pay their fair share of tax in Australia, and balance support for Australia’s climate change action with the need to align the tax treatment of these assets with the treatment of other assets.
“Through our Capacity Investment Scheme, specialist investment vehicles such as the Clean Energy Finance Corporation’s Rewiring the Nation Fund, and the Investor Front Door we are accelerating private investment in our clean energy transition,” Chalmers said in the media release.
According to the treasurer’s media release, the draft legislation includes changes aiming to clarify that state and territory laws, such as property law severance provisions, do not determine which assets fall within the foreign resident CGT regime.
These planned reforms, which will apply to investments made since the regime’s introduction in 2006, seek to tackle uncertainty about the definition of real property, reinforce the law’s original intent, and ensure consistent CGT treatment for assets foreign investors hold on Australian land.
“This will protect revenue by ensuring foreign residents disposing of an interest in large-scale infrastructure assets which are fixed on Australian land are subject to CGT,” Chalmers said in the media release. “This includes buildings and energy, transport and telecommunications assets.”
Per the treasurer, the planned legislation also aims to more closely align Australian tax laws with the OECD Model Rules for taxing foreign residents and better align the tax treatment of foreign investors with the treatment of Australian residents.
