The Business Council of Australia (BCA) welcomes the opportunity to comment on draft legislation that amends the Capital Gains Tax (CGT) treatment of foreign investors holding assets with a close connection with land.
Capital is mobile, and as the Treasurer has noted, the race for global capital is becoming more intense. The proposed changes will make it harder for Australia to obtain this necessary investment by reducing the returns net of tax to international investors. This is compounded by the retrospective nature of the changes and an inadequate tax policy development process.
Australia has significant investment needs, particularly to lift weak productivity growth, meet our carbon reduction targets and address the housing crisis. High rates of dwelling investment will be needed to meet the National Housing Accord target of 1.2 million new homes over five years, along with at least $400 billion of capital investment to meet Australia’s 2035 emission reduction targets.
Despite these needs, business investment has languished at low levels for a lengthy period, despite recent green shoots. This has reduced Australia’s capital per worker and productivity levels. In turn, it has fed into the weakness in real wages and household disposable incomes – having a real impact on the lives of everyday Australians. Stable and competitive settings for long-dated infrastructure investment supports capital deepening, productivity and the build-out of enabling infrastructure needed for sustainable growth and international competitiveness.
The BCA’s Global Investment Competitiveness Index shows that while Australia’s relative global ranking slipped from 17 in 2019 to 21 in 2025 when compared with 41 other nations. Australia ranked very strongly in some areas, such as tax (2nd) but poorly in other areas, such as business taxation (38th). Other nations are chasing global capital and Australia must do the same. The current proposals will not help by discouraging international investment when we need to promote it.
- Stability: The proposals are expanding the scope of assets that are taxed, and forecasts show that the proposals will increase tax revenue. This increase in tax is concerning as it reduces long-term stability in tax settings, increases sovereign risk and creates investment uncertainty.
- Retrospectivity: The BCA is concerned that the proposal operates retrospectively. This sends a harmful signal to potential investors into Australia that the rules can change after an investment is made. This is particularly relevant where Australia is seeking to attract ongoing long-term investment from offshore investment funds into infrastructure.
- Concession for renewable energy: The draft legislation provides a very limited concession for renewable energy assets sold before July 2030. This concession is particularly limited in scope. The concession is also not available for certain battery and power storage infrastructure, which is regarded as critical to achieving Australia’s net zero ambitions.
- Transition period: The proposal does not include a transition period, or general grandfathering of assets that were purchased before commencement. If the proposal proceeds, there should be a reasonable transition period that applies to all investments, not just renewable infrastructure.
- Higher tax rate on passive investments in infrastructure: It is important for investment trusts to be able to be classified under tax law as Managed Investment Trusts (MITs). The proposed changes have a doubly negative effect by both making foreign residents taxable on gains from these assets, while not permitting them to be held through MITs.
- Impact on Australian resident purchasers: The measures also impose due diligence obligations on Australian resident purchasers. This is likely to create significant compliance costs on infrastructure transactions, which is likely to further decrease Australia’s attractiveness as a destination for investment.
More broadly, we note the attractiveness of Australia as a destination for capital depends not only on tax settings, but on the wider investment environment. Continued efforts to streamline approvals processes and improve the efficiency and predictability of Foreign Investment Review Board pathways would also assist in accelerating project delivery and maintaining Australia’s competitiveness for global capital.