The federal government has dropped retrospective provisions from proposed changes to Australia's foreign resident capital gains tax (CGT) regime, following sustained pushback from the property sector.
The government's newly tabled legislation removes clauses that would have applied new CGT rules to transactions dating as far back as 12 December 2006.
The Property Council of Australia said the move followed strong industry advocacy during consultation, having raised concerns that backdating the rules risked undermining confidence in the tax system.
That concern wasn't abstract: because many affected foreign investors would not have lodged Australian tax returns for older transactions on the reasonable basis that those assets weren't taxable at the time, the normal four-year limit on reopening past tax matters would not have applied, leaving nearly two decades of disposals potentially open to review.
Property Council chief executive Mike Zorbas (pictured) welcomed the change, framing it as a matter of basic investment logic.
"This policy pivot is a win for commonsense. Australia relies on long-term investment to build homes, infrastructure, and the assets that support economic growth," Zorbas said in a media release.
He warned that applying new tax treatment to decades-old transactions carried real risk for the flow of capital into the country.
"Applying new tax rules to transactions completed two decades ago would have spooked the international investors we need to help build tomorrow's Australia," Zorbas said.
Despite the retrospectivity backdown, the legislation still broadens Australia's foreign resident CGT regime by widening the definition of "real property" to capture a larger range of infrastructure and energy assets. This tightening sits alongside other recent changes to Australia's tax settings, including domestic negative gearing and CGT reforms that became law this year.
Zorbas argued that certainty, not just favourable settings, is what ultimately determines where global capital lands.
"Global capital is highly mobile and Australia competes with other markets every day for investment," he said, adding that "tax policy certainty matters because investment decisions made today shape the homes, jobs and infrastructure of future generations."
For brokers working with investors, developers, or clients exposed to foreign capital flows, the change removes a significant source of uncertainty around historical transactions, even as the broader CGT regime continues to widen in scope.
The Property Council said it would keep engaging with government to ensure the remaining reforms are implemented practically, "without creating unnecessary compliance burdens or discouraging investment into Australian property, infrastructure and housing."
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