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ARTICLE · 16 OCTOBER 2026

Foreign Resident CGT Changes And Implications For M&A Transactions

Herbert Smith Freehills Kramer LLP
Herbert Smith Freehills Kramer LLP
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Herbert Smith Freehills Kramer LLP

Herbert Smith Freehills Kramer LLP

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Australia's foreign resident capital gains tax regime is undergoing its most significant expansion since 2006, with new rules commencing October 2026 that will fundamentally reshape how M&A transactions involving land-connected assets are structured and executed. The changes introduce a 365-day look-back test for determining whether shares or units constitute indirect Australian real property interests, broaden the definition of taxable Australian real property to capture energy, infrastructure and data-cen

AustraliaTax
Toby Eggleston
Toby Eggleston
Ryan Leslie
Ryan Leslie
Jay Prasad
Jay Prasad
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The changes materially increase both the scope of Australia’s foreign resident CGT regime and the execution risk associated with M&A transactions involving land-connected assets or foreign investors.

In brief

  • Since 2006, Australia has generally confined foreign residents’ CGT exposure to “taxable Australian property” (TARP), being principally direct Australian ‘real property’ and 10% or greater interests in entities whose value is principally derived from that real property (Indirect Australian Real Property Interests or IARPI). The new foreign resident CGT rules, which commence on 1 October 2026 significantly broaden the assets treated as taxable Australian real property (TARP), introduce a 365-day look-back principal asset test, and impose new ATO notification requirements for share and unit sale transactions of $50m+ by non-residents.

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