Government drops retrospective foreign CGT changes after CPA Australia advocacy

• Bill introduced to Federal Parliament today removes the contentious retrospective element of foreign resident capital gains tax reforms
• Changes will now apply prospectively, with statutory protections for past assessments
• CPA Australia says the outcome is a win for certainty, fairness and Australia’s reputation as a stable investment destination

CPA Australia says the Federal Government’s decision to remove retrospective elements from proposed foreign resident capital gains tax (CGT) reforms delivers important certainty for taxpayers, advisers and foreign investors.

The Bill introduced to Federal Parliament today removes a contentious feature of the exposure draft, which would have applied an expanded CGT base to transactions dating back almost 20 years to 12 December 2006.

CPA Australia Tax Lead Jenny Wong said the Government had listened to concerns raised by the profession and responded in a way that supports fairness, certainty and confidence in Australia’s tax system.

“This is a significant and welcome outcome. The exposure draft would have retrospectively rewritten the tax treatment of transactions going back almost two decades. CPA Australia said that was disproportionate and damaging to investor confidence, and the Government has responded,” Ms Wong said.

“The measures will now apply prospectively, which is the right answer.”

In its April submission to Treasury, CPA Australia warned that the draft legislation, as framed, would retrospectively reopen transactions dating back nearly two decades and broaden the CGT base in ways that went well beyond a narrow legislative clarification.

The Bill as introduced applies the changes only to CGT events occurring on or after commencement. It also includes statutory protections preventing the Commissioner from amending prior-year assessments for foreign resident CGT matters outside ordinary amendment periods, subject only to the standard fraud or evasion exception and reviews, appeals or objections already on foot before 10 April 2026.

Ms Wong said the legislative safeguard was particularly important because taxpayers should not have to rely on administrative practice for protection against historical exposure.

“Importantly, the protections are written into the law itself. Taxpayers won’t have to rely on administrative discretion – the Bill expressly prevents historical assessments being reopened outside the normal amendment periods. That’s the legislative certainty we asked for.”

CPA Australia said the change from exposure draft to introduced Bill demonstrates the value of meaningful consultation with the profession and reinforces why adequate consultation periods matter.

“This is what good consultation looks like – but it shouldn’t take an outcry to get there. A two-week consultation window on changes of this scale is simply not enough,” Ms Wong said.

“For future reforms, we encourage the Government to consult early and give stakeholders time to identify problems before legislation is drafted, not after.”

The new Bill expands and clarifies the foreign resident CGT base, including a new inclusive definition of real property covering interests in land, rights over land, things fixed or installed on land, and related licences and contractual rights.

It also includes water entitlements and options, extends the testing period for the principal asset test to 365 days, and treats mining, quarrying or prospecting information as taxable Australian real property.

CPA Australia said the Explanatory Memorandum provides useful guidance on what is not intended to be caught as real property, including incidental service arrangements and mortgage-backed securities.

However, Ms Wong said further clarity may still be needed to ensure the law itself delivers the certainty intended.

“The Explanatory Memorandum provides useful guidance on what isn’t caught as real property — it’s clear that incidental service arrangements aren’t meant to be included, and mortgage-backed securities are excluded. But guidance in an explanatory memorandum isn’t the same as certainty in the law.”

Media contact

Camille Hanton
External Affairs Lead
[email protected]
0431 180 475