Commissioned by Bloomberg to provide commentary for its international insights bulletin, tax partner Shaun Cartoon explains the implications of the Australian Government’s proposed changes to capital gains tax rules for foreign investors.
“The Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026, introduced on 2 July, is intended to bring valuable land-related interests within Australia’s tax net by narrowing the existing tax break that lets foreign investors disregard capital gains on Australian assets that aren’t substantially tied to land. At the heart of the changes is a new statutory definition of ‘real property’, which overrides the general law meaning and sweeps in almost anything fixed or installed on Australian land, along with licenses and contractual rights exercisable over or in relation to land.
“Foreign investors in recent years have poured capital into assets such as Australian data centers and energy infrastructure. The value of those businesses often is derived from access to Australian land, rights to use specific space or infrastructure, and substantial equipment installed on or integrated with the land, such as turbines, batteries, pipelines, and transmission infrastructure. Much of that value has historically fallen outside Australia’s capital gains tax regime. In the recent Federal Court decisions of YTL Power and Newmont, the court rejected the ATO’s broad interpretation of ‘real property’ and held that the expression has its technical legal meaning.”
The Bill is designed to change that position. Foreign investors will breathe a sigh of relief, Shaun writes, that the government has not proceeded with the proposal, canvassed in the exposure draft, to expand the definition of “real property” for Australian Tax purposes with retrospective effect to December 2006. The new definition of “real property” applies to capital gains tax events happening on or after commencement. For pre-commencement capital gains tax events, real property retains its ordinary meaning.
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