Australia’s tax compliance landscape is changing quickly. Today’s key developments affect foreign investors in Australia, Australian businesses making cross-border payments, software and SaaS users, and employers preparing their September lodgments.
The biggest development is the passage of foreign resident Capital Gains Tax reforms. The Bill is awaiting Royal Assent, so you should monitor the commencement date before completing transactions involving Australian land, infrastructure or renewable energy assets.
1. Prepare for foreign resident CGT reforms after Parliament passes the Bill
The Treasury Laws Amendment (Strengthening Accountability for Tax Adviser Misconduct and Other Measures) Bill 2026 passed both Houses of Parliament on 10 September 2026. It is now awaiting Royal Assent.
According to the Treasury Ministers’ media release, the reforms will bring the Australian CGT treatment of foreign residents closer to the OECD Model Rules.
The changes are expected to commence on the first 1 January, 1 April, 1 July or 1 October after Royal Assent. If Royal Assent occurs before 1 October 2026, the expected commencement date will be 1 October 2026.
For foreign investors in Australia, the reforms will significantly expand the assets that may fall within taxable Australian real property, or TARP.
The expanded definition will cover:
- Interests and rights over Australian land.
- Contractual and personal rights connected with Australian land.
- Fixed or installed infrastructure, regardless of how a State or Territory classifies the asset.
- Solar panels, wind turbines, batteries and transmission lines.
- Data centres, mining plant and equipment, and gas pipelines.
- Leases, licences and contractual rights over covered assets.
- Water entitlements.
- Options and rights to acquire covered real property.
Mining, quarrying and prospecting information will also be included when testing the value of the principal asset.
Review the 365-day principal asset test
The principal asset test will apply where an entity met the test at any time during the 365 days before the CGT event.
This means you should not assess an asset only on the date of sale. A company may still fall within the regime if it previously met the principal asset test during the relevant look-back period.
Review transactions involving Australian land-rich companies, infrastructure groups and entities with significant natural resource interests. This applies whether the business operates from Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra or another Australian location.
Prepare for new vendor notification rules
For non-indirect Australian real property interest transactions of $50 million or more, foreign resident vendors will need to notify the ATO:
- At least 28 days before completion where more than 31 days exist between signing and completion.
- As soon as reasonably practicable in other cases.
If the vendor does not provide a valid notification, the vendor declaration will be invalid. The purchaser must then withhold 15%.
The purchaser knowledge test will also move from a subjective standard to an objective standard. Non-compliance penalties will start at $7.5 million.
These changes make transaction records, valuation evidence, contracts and completion timetables critical. Keep a clear audit trail so your business can demonstrate how it assessed the asset and withholding requirements.
Check the renewable energy concession
The final Bill includes a 50% transitional CGT discount for eligible Australian renewable energy assets. The concession applies to CGT events from commencement until 30 June 2040, extending the earlier proposed end date of 2030.
The concession can also apply to indirect interests where renewable energy assets represent at least three times the value of other TARP assets.
The final reforms apply prospectively to CGT events occurring on or after commencement. Earlier concerns about broader retrospectivity were removed from the final version.
2. Review offshore software and SaaS payments before the next remittance
The ATO has finalised TR 2026/2, which addresses when software-related payments are royalties for Australian tax purposes.
The ATO also released draft PCG 2026/D4. Consultation closes on 2 October 2026.
The ruling is particularly important for Australian businesses paying overseas software, cloud, platform, licensing or distribution providers. A payment may attract royalty withholding tax where it relates to the use of copyright or other intellectual property rights.
The practical question is not simply whether you call an arrangement “SaaS” or “software access”. You should examine:
- What rights the contract grants.
- Whether the Australian payer can use, reproduce, modify or distribute software.
- Whether copyright or other intellectual property rights are involved.
- Whether support, hosting and licensing are bundled.
- Where the software owner and payment recipient are resident.
- Whether a tax treaty changes the withholding outcome.
International pushback is growing. The US Treasury objected during the consultation process. The Washington-based National Foreign Trade Council has said the ATO position runs against international tax norms. The White House has also warned trading partners against introducing new taxes on US technology companies.
Reporting by The Conversation noted that Apple, Microsoft and Amazon reported combined Australian income of almost A$30 billion in 2023–24, with combined tax payable of approximately A$478 million. The ATO’s position could increase royalty withholding tax exposure for some cross-border software payments, and further litigation is possible.
The ATO has also published a decision impact statement on Oracle Corporation Australia Pty Ltd v Commissioner of Taxation [2025] FCAFC 145. The statement highlights the importance of preserving Mutual Agreement Procedure rights where a payment may be taxed in more than one country.
Action point: Build a payment register for all overseas software, cloud and platform suppliers. Flag higher-risk agreements before the next payment. This will help you identify withholding obligations and reduce the risk of historic reporting gaps.
3. Lodge the PAYGW annual report by 31 October
The ATO updated its PAYG withholding annual report guidance on 11 September 2026. A new completion guide was published on 4 September.
The PAYG withholding from interest, dividend and royalty payments paid to non-residents annual report, known as NAT 7187, covers the period from 1 July 2025 to 30 June 2026.
The lodgment deadline is 31 October 2026.
Use NAT 7187 to report relevant:
- Interest payments to non-residents.
- Unfranked dividends paid to non-residents.
- Royalty payments to non-residents.
- Amounts withheld from those payments.
If interest or dividend amo
