Australia is preparing to overhaul its capital gains tax (CGT) rules for foreign investors, with the federal government pushing reforms it says will ensure overseas buyers “pay their fair share”. But the proposal has already ignited controversy not least because the changes would apply retrospectively, potentially back‑taxing investors all the way to 2006.
Treasurer Jim Chalmers this month released draft legislation to reform the foreign‑resident CGT regime, first flagged in the 2024‑25 budget and expected to raise billions in additional revenue. The reforms would dramatically widen the scope of what counts as taxable Australian property.
Julie Abdalla, head of tax and legal at the Tax Institute, told Yahoo Finance the changes would “significantly expand” the types of assets and transactions captured under CGT rules. At present, foreign investors are taxed only on gains from “taxable Australian property”, mainly land and shares in land‑rich companies.
“The draft legislation goes further,” Abdalla said. “It broadens what counts as Australian real property not just land itself, but assets fixed to land, and even licences or contractual rights closely connected to land.”
This means infrastructure, energy assets and certain land‑linked rights previously not treated as property could now fall within the tax net. Indirect investments, such as shares in companies whose value is tied to these assets, would also be affected.
The proposed laws would overturn two major Federal Court rulings from last year that sided with foreign investors over the Australian Taxation Office. In those cases, North American mining giant Newmont and Malaysian conglomerate YTL Power were found not liable for CGT on the sale of certain Australian assets with YTL’s disputed gain alone reaching $948 million.
With billions in revenue at stake and retrospective taxation on the table, the reforms are shaping up as one of the most contentious tax changes in years.
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