Strengthening the foreign resident CGT and renewable energy discount

Bill introduced into Parliament: Key differences from exposure draft explained

On 2 July 2026, the Government introduced a Bill into Parliament relating to the foreign resident CGT regime changes. The proposed amendments  were originally announced in the 2024-2025 Federal Budget and have attracted attention due to the recent taxpayer wins in the decisions in YTL Power Investments Limited v Commissioner of Taxation [2025] FCA 1317 (YTL) (now under appeal) and Newmont Canada FN Holdings ULC v Commissioner of Taxation (No 2) [2025] FCA 1356 (Newmont) (with the final determination referred for consideration by an appointed referee).

There was an extremely short two-week consultation period following Treasury’s release of Exposure Draft legislation on 10 April 2026. With significant concerns expressed through the submission process, the Government appears to have taken on some of the feedback on certain critical issues and made a number of key changes to the Exposure Draft. We have summarised those below.

There is some additional commentary included in the legislative guidance accompanying the Bill which provides some useful clarification on aspects of the changes.

Foreign resident CGT regime and renewable energy discount - key changes from the exposure draft legislation.

1. New definition of “real property” to be prospective

The most controversial aspect of the Exposure Draft was that certain parts of the proposed definition of “real property” would apply retrospectively from 12 December 2006 (when Division 855 of the Income Tax Assessment Act 1997 was introduced). The Exposure Draft explained that the policy intention of the amendments was to provide certainty and clarity and to protect the revenue base. Practically, this was likely a protection mechanism adopted in the Exposure Draft by the Government to prevent a “floodgate” of amended assessments due to the decisions in YTL and Newmont.

The submissions raised during consultation strongly criticised the retrospectivity aspect of the Exposure Draft. In a welcome move, the Bill has removed the retrospectivity aspects and proposed the definition of “real property” should apply prospectively with a new statutory mechanism being introduced to limit the circumstances in which the Commissioner can amend past assessments (so as to “protect revenue collected” as a result of amended assessments due to the decisions in YTL and Newmont).

It should be noted that there will be consequential amendments to ensure the treaty meaning of real property (and any other similar concepts) under Australia’s double tax treaties aligns withs the new domestic definition.

2. Limiting Commissioner’s amendment of past assessments

As above, the Bill limits the Commissioner’s ability to amend a past assessment for a foreign resident to the extent the assessment:

• Included a particular about a capital gain for a CGT event that relates to a CGT asset that was assessed at the time as taxable Australian property (TAP) or an indirect Australian real property interest (IARPI)); and
• The foreign resident’s limited amendment period has ended (typically a four-year period).

These measures ensure that assessments made before commencement, and where the limited amendment period has ended, cannot now be altered because the Commissioner will no longer have the power to amend them.

If a foreign resident, whose limited amendment period has ended, has made an objection to their assessment before 10 April 2026 (when the Exposure Draft was released), the Commissioner’s power to amend an assessment to give effect to the outcome of the objection (or any subsequent tribunal or court decision) is not affected. 

The amendments do not affect the amendment rights of foreign residents who had an assessment made before commencement and where the limited amendment period has not ended. Nor do the amendments affect the Commissioner’s ability to amend an assessment at any time in cases of fraud or evasion.

3. Principal Asset Test – to remain as 365-day test but Ministerial discretion introduced

The testing time under the Principal Asset Test (PAT) in the Bill remains consistent with the Exposure Draft, which is to move from a point in time test to a 365-day test. The amendments expand the PAT to apply to the CGT asset at any time during the 365 days that precede the CGT event.

The PAT is satisfied if the underlying assets derive more than 50 per cent of their market value from TARP at any time during the 365 days that precede the CGT event.

The Bill now also provides for a legislative instrument making power which will allow the Minister to adjust the testing time under the PAT (as well as reporting and withholding obligations) to minimise compliance costs for certain foreign investors.

4. Notification requirements - Ministerial discretion introduced

The new notification requirements as outlined in the Exposure Draft continue to apply under the Bill. For disposals of non‑IARPI membership interests with an aggregated value of A$50 million or more, foreign resident vendors must notify the ATO within a prescribed period when making a non‑IARPI vendor declaration to a purchaser.

Importantly, there has been no change to the purchaser’s knowledge threshold as contained in the Exposure Draft. Purchasers must consider whether they could reasonably be expected to know that a declaration is false, rather than relying solely on the vendor’s statement. This proposed amendment places a higher onus on purchasers to more actively consider ordinary due diligence results and readily available information rather than relying exclusively on vendor declarations which may be inaccurate.

The Bill does provide an additional concession not included in the Exposure Draft which allows a purchaser to rely on a non-IARPI declaration if it is for a transaction that is of a kind specified by the Minister by legislative instrument, or circumstances specified by that legislative instrument apply to the transaction.

5. Renewable energy discount - threshold reduced from 90 per cent renewable assets to 75 per cent renewable assets

A transitional 50 per cent CGT discount was proposed to be introduced for eligible foreign residents (excluding individuals) disposing of Australian renewable energy assets or qualifying indirect interests before 30 June 2030.

The key change between the Exposure Draft and the Bill is the reduction of the renewable asset threshold from 90 per cent to 75 per cent. Accordingly, the renewable energy asset test now requires at least 75 per cent (instead of 90 per cent) of underlying TARP value to relate to renewable energy assets in order to qualify for the transitional 50 per cent CGT discount.

Unfortunately, the renewable energy discount has not been extended and is due to expire on 30 June 2023 under the Bill.

Commencement

The proposed changes to the foreign resident CGT regime and renewable energy discount commences on the first 1 January, 1 April, 1 July or 1 October to occur after the day the Act receives the Royal Assent.

The measures are estimated to increase receipts by A$2,275.0 million over the five years from 2025-26.

BDO comment

We recommend foreign investors plan for the proposed amendments by undertaking the following practical steps:

• Consider how your Australian asset holdings would be classified against the new TARP definition
• Review upcoming transactions for potential exposure
• Build 365‑day PAT monitoring into transaction readiness and exit planning – this is likely to be challenging in practice
• Update M&A playbooks to reflect new ATO notification and purchaser due diligence requirements
• Model renewable energy exits before and after 30 June 2030 to understand the value and limits of the CGT discount.

If you would like assistance assessing the impact of these proposed changes on your investment structures or planned transactions, contact your local BDO adviser.