I live overseas and own Australian assets — what changes on 1 October 2026?

A unit in Sydney has been rented out since the family moved back. A headline goes past about Australia tightening capital gains tax on foreign investors, with the date 1 October attached to it, and the question forms: is selling next year about to become a different proposition?

For that owner, mostly not. The changes starting on 1 October 2026 are real and they are broad in places, but they were written to close a specific gap. The people they actually reach are the ones who hold Australian land through an entity rather than in their own name.

What became law on 15 September

The Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026 passed both Houses on 10 September 2026 and received Royal Assent on 15 September 2026 as Act No. 86 of 2026. The ATO updated its page on the measure the following day and now states that the Act is law and that the changes take effect from 1 October 2026.

The start date was not chosen in September. The relevant Schedule commences on the first 1 January, 1 April, 1 July or 1 October to occur after assent — which, with assent on 15 September, lands on 1 October.

There are four changes. The meaning of taxable Australian real property is clarified and broadened, including a new statutory definition of ‘real property’ and the addition of water rights. The principal asset test applies over the 365 days before a CGT event rather than only at the time of the event. Certain foreign resident vendors who declare that their membership interests are not indirect Australian real property interests must now notify the Commissioner. And there is a transitional 50% CGT discount for eligible foreign residents disposing of certain Australian renewable energy assets.

If the property is in your own name, this is not about you

A foreign resident is taxed in Australia only on taxable Australian property. Australian real property — a house, an apartment, a commercial building, land — has sat inside that definition since the regime began in 2006, and it stays there. A sale that was assessable in Australia on 30 September is assessable on 1 October for the same reason it always was.

The withholding does not move either. Foreign resident capital gains withholding applies to all real property sales, and for contracts signed from 1 January 2025 the rate is 15% of the value of the property with no minimum value threshold. The purchaser holds that amount back and pays it to the ATO at or before settlement. An Australian resident avoids it by obtaining a clearance certificate at or before settlement; a foreign resident who expects the withheld amount to exceed the eventual tax can apply for a variation notice specifying a reduced rate. Neither mechanism is changed by the new Act.

The change that matters: a year-long look-back

Between direct ownership and no connection at all sits a middle category — an indirect interest in Australian real property. A foreign resident has one where two tests are met together. The first is the non-portfolio interest test: you and your associates own 10% or more of an entity, Australian or foreign. The second is the principal asset test: the market value of that entity’s assets is mainly attributable to Australian real property, meaning more than half of it.

Until now the second test was a snapshot, applied just before the CGT event happened. The explanatory memorandum is blunt about what that allowed — foreign residents could seek to avoid Australian CGT by altering the composition of an entity’s assets immediately before the CGT event so the test was not satisfied at the time of the event.

From 1 October the test is met if the entity derives more than 50% of its market value from Australian real property at any time during the 365 days preceding the CGT event, up to just before it happens. A balance sheet diluted in the weeks before a sale no longer settles the question; a year of history does. The memorandum describes the provision as operating on a look-back basis from the date of the CGT event and says it is not intended to require burdensome compliance in the lead-up to a sale. It also leaves the Minister a power to set an alternative testing time for certain foreign residents by legislative instrument.

What ‘real property’ now means

The second change is quieter and reaches further. Real property was not defined in the income tax law; it carried its ordinary meaning. Over time, state and territory property laws — particularly severance provisions, which treat certain things attached to land as separate from the land — were read into that meaning, so similar assets were taxed differently depending on which state they sat in.

The Act now defines the term. In addition to its ordinary meaning, real property includes any interest in or right over land; a personal right to call for or be granted such an interest; a licence or contractual right exercisable over or in relation to land; and a thing, or combination of things, fixed or installed on land — determined irrespective of state and territory property laws. Taxable Australian real property also now expressly includes a water entitlement relating to a water resource situated in Australia, and an option or right to acquire an asset that is itself taxable Australian real property.

The $50 million notice, and why it is probably not yours

Where a vendor gives a purchaser a declaration that a membership interest is not an indirect Australian real property interest — the declaration that stops the purchaser withholding — that declaration is no longer valid on its own. One of three things must hold: the vendor gave the Commissioner a notice about it, the aggregated value of the transaction is under $50 million, or the transaction is of a kind the Minister has specified by legislative instrument.

Under $50 million, the existing vendor-to-purchaser declaration framework is unchanged and nothing needs to go to the ATO. At or above it, the notice must be lodged within the transaction’s review period, which runs from the contract until immediately before the purchaser becomes the owner: at least 28 days before the end of that period where it exceeds 31 days, and as soon as reasonably practicable where the period is 31 days or fewer. Related transactions are aggregated, so splitting one sale into several smaller ones does not put a deal under the threshold. If the vendor does not notify properly, the purchaser has to withhold.

Two things people get wrong

The first is that the new rules reach backwards. They do not. The amendments apply prospectively, to CGT events happening on or after commencement. For a disposal, the CGT event generally happens when the contract is entered into rather than at settlement — so a contract signed in late September and settled in November sits under the old rule, and one signed on 1 October does not. The Act also leaves untouched the amendment rights of foreign residents who were assessed before commencement and whose limited amendment period has not ended.

The second is the instinct that a restructure shortly before a sale changes the answer. That was the point of the 365-day amendment, and it is the one part of this package built specifically to stop it. Nor does a tax treaty quietly solve it: the Act adds a signpost confirming that references to ‘real property’, ‘immovable property’ and ‘land’ in Australia’s treaties mean taxable Australian property.

This is general information current as at 19 September 2026, not advice about any particular holding, and whether a specific entity passes or fails these tests is a valuation question before it is a tax question. The practical consequence of the 365-day test is evidentiary: the market value of an entity’s assets across the year before a sale is now part of the file, not just its position on the day of the contract. If a sale is being contemplated for next year, that record is easier to build now than to reconstruct later. Our earlier pieces on the main residence exemption after moving overseas and on the clearance certificate and the 15% held back at settlement cover the direct-ownership side of this. Property investor tax is one of our four service areas, and the investment property calculator on this site is there while you work out what a sale would look like.