What scrapping CGT retrospectivity doesn’t address

Dhanushka Jayawardena has said that Treasury's 2 July explanatory memorandum removing CGT retrospectivity marks a change that many welcome.

“The removal of retrospectivity addresses the single most criticised element of the reforms,” he said.

That this change, however, does not narrow the scope for future expansion, he said.

“The change restores fairness and certainty for the past, but does not soften the substantive reform going forward.”

“From commencement, economic exposure to Australian land, infrastructure, energy and resources will generally be within the CGT net on exit, and the concerns about valuation, compliance cost and competitiveness for infrastructure capital remain.”

CPA Australia tax lead Jenny Wong said: “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”.

The change will include statutory protections preventing the Commissioner of Taxation from amending prior-year assessments for foreign-resident CGT matters outside ordinary amendment periods, subject only to the standard fraud or evasion exception and to reviews, appeals, or objections already on foot before 10 April 2026, CPA Australia said.

Jayawardena called the 50 per cent CGT discount for foreign investors a “use-it-or-lose-it opportunity” as it ends on 30 June 2030.

He also said that the 90 per cent threshold for indirect disposals should be assessed now, especially for integrated generation and storage projects, where the storage component may take the entity below the threshold.

“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,” Wong added.

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

The bill introduces an expansion and clarification of the foreign resident CGT base, including a new definition of taxable Australian real property (TARP) which includes water entitlements and options, with an extension of the testing period for the principal asset test to 365 days, while also treating mining, quarrying, or prospecting information as TARP.

“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,” Wong said.

“Commencement is tied to the first quarter after Royal Assent, so the window to prepare is short. Foreign investors with Australian exposures, and their advisers, should confirm their position on both historical and prospective disposals without delay,” Jayawardena said.