From 1 October 2026, foreign resident CGT reaches beyond the transaction date

When an advice practice sees a foreign resident client considering a disposal, the transaction date appears to offer a natural boundary. Look at what is held when the CGT event occurs, identify the interest being disposed of, and assess the position. That snapshot is a reasonable first instinct.

The timing of the new measure changes the question. The ATO says the measure is now law, but the changes take effect from 1 October 2026. From that date, the principal asset test will apply over the 365 days before a CGT event, rather than only at the time of the event. ATO guidance

The snapshot becomes a timeline

If the transaction-date snapshot were sufficient, the relevant analysis would begin and end with the asset position at the CGT event. The change means that approach may leave an advice practice without information needed to assess the principal asset test.

The practical response is not to assume that every transaction involving a foreign resident will be affected. It is to consider whether the tax handover captures the asset position over the 365 days before the CGT event, where that information is relevant to applying the test. That is a practice workflow response to the ATO’s stated lookback, not a claim that the ATO has prescribed a standard advice file.

The measure is therefore more than a change to the final calculation. It changes the point at which a practice may need to identify and refer a tax issue.

Classification now needs an earlier question

The ATO says the changes clarify and broaden the meaning of taxable Australian real property for the foreign resident CGT rules. They include a new definition for real property and add water rights. The ATO’s summary

For a practice, the implication is that a broad client description may not be a sufficient tax brief. The relevant information may include the nature of the asset, whether real property or water rights are involved, and how the interest is held. Those are matters to verify when assessing whether the ATO’s changes are relevant, not conclusions about the tax treatment of a particular asset.

That distinction matters in triage. The adviser does not need to resolve the tax classification at the first conversation, but may need to recognise when the description of an investment or business asset warrants a tax referral.

The vendor notification belongs in the process map

The changes also introduce a notification requirement for certain foreign resident vendors. The ATO says this involves making a declaration that membership interests are not indirect Australian real property interests. ATO guidance

For practice management, that creates a useful process question: does the proposed transaction involve a membership interest and circumstances in which the notification requirement may apply? Asking that question earlier is a workflow recommendation. It is not a suggestion that every foreign resident vendor must make the declaration.

The point is to avoid treating the tax handover as a final administrative step after the transaction has been defined. The relevant facts may need to be identified while the practice is still establishing the client’s residency, asset and transaction path.

Renewable energy assets have a separate transition point

The ATO also identifies a transitional 50% CGT discount for eligible foreign residents disposing of certain Australian renewable energy assets. ATO guidance

For advisers, the practical implication is to treat the asset description and eligibility question as matters for confirmation. A client’s description of an investment as a renewable energy asset does not, by itself, establish eligibility for the transitional discount. The relevant facts should be included in the tax referral.

What the handover may need to capture

For a potentially affected client, a practice may want its process to prompt for:

• the client’s foreign resident status and whether the transaction involves a membership interest;
• the nature of the asset, including whether real property or water rights are involved;
• the asset position over the 365 days before the CGT event, where relevant to the principal asset test;
• whether the vendor notification requirement may apply;
• whether the disposal involves certain Australian renewable energy assets and raises the transitional 50% CGT discount question.

These are practical prompts for deciding when a tax specialist should be involved. They are not substitutes for tax advice or a conclusion about a client’s eligibility.

From that date, the principal asset test will apply over the 365 days before a CGT event, while the broader meaning of taxable Australian real property, the vendor notification requirement and the transitional treatment for certain Australian renewable energy assets will need to be considered with the relevant facts.

The handover should give the tax specialist the transaction history, asset classification and membership interest details needed to assess the changes.¹