From 1 October 2026, foreign residents are taxed on a wider range of Australian real property interests (including closely related interests such as water entitlements), and the test for whether shares in a company are an indirect Australian real property interest looks at the company's assets at any time in the 365 days before the sale. The 15% foreign resident capital gains withholding rate is unchanged.
Foreign residents pay Australian capital gains tax only on "taxable Australian property": mainly Australian real property, indirect interests in it, and assets of an Australian permanent establishment. Legislation passed in September 2026 widened those rules for CGT events on or after 1 October 2026. This guide explains what changed and what foreign investors and foreign-owned groups should check.
What changed from 1 October 2026
The Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Act 2026 received assent on 15 September 2026. Its foreign resident CGT measures apply to CGT events from 1 October 2026:
- Wider "real property": taxable Australian real property now extends to closely related interests, such as water entitlements, not just land and buildings.
- 365-day principal asset test: shares or units are an indirect Australian real property interest if, at any time in the 365 days before the sale, the entity's assets were mainly Australian real property. Previously the test applied only at the time of the sale, which allowed assets to be reshuffled just beforehand.
- Withholding credits: the rules for crediting amounts withheld under the foreign resident withholding regime were also amended.
What did not change
- 15% withholding: buyers of Australian real property, and of some indirect interests, must withhold 15% of the price unless the seller provides an ATO clearance certificate or a valid declaration. This has applied to all property, with no value threshold, for contracts from 1 January 2025.
- No CGT discount: foreign residents generally cannot use the 50% CGT discount on gains accrued after 8 May 2012 while they were foreign residents. Companies never get the discount.
- Treaty protection: most of Australia's tax treaties allow Australia to tax gains on real property, so the treaties rarely remove this tax.
Who should review their position
- Foreign parents selling shares in an Australian subsidiary that owns or recently owned land, or holds water or similar rights.
- Groups planning a restructure before a sale: moving property out of an entity shortly before selling no longer works if the entity held mainly real property in the previous 365 days.
- Buyers of shares in Australian landholding companies from foreign sellers, who may need to withhold.
Also check state landholder duty, which is a separate tax on acquiring interests in landholding companies; see buying a business in Australia as a foreigner.
How we help
We work with foreign-owned groups on Australian tax compliance, including the CGT position on exits and restructures, ATO clearance certificates and the company tax returns that follow. See our taxation services and tax guide for foreign subsidiaries.
Frequently asked questions
What changed for foreign resident CGT on 1 October 2026?
For CGT events from 1 October 2026, taxable Australian real property includes closely related interests such as water entitlements, and the principal asset test for indirect interests looks at any time in the 365 days before the sale, not just the sale date.
Did the foreign resident capital gains withholding rate change?
No. It remains 15%, and has applied to all property with no value threshold for contracts entered into from 1 January 2025.
Can foreign residents claim the CGT discount?
Generally no, for gains accrued after 8 May 2012 while they were foreign residents. An apportioned discount can apply for periods of Australian residence. Companies cannot claim the discount.
Is the new law in force?
Yes. The Act received assent on 15 September 2026 and the foreign resident CGT changes apply to CGT events on or after 1 October 2026.
This content is general information only and is not legal, financial or tax advice. Laws and regulations change often. For advice on your circumstances, speak to a qualified adviser.