- Media Release
Mining wins on CGT retrospectivity
Foreign-owned mining companies operating in Australia will no longer be retrospectively liable for capital gains tax (CGT) on real property holdings after the Albanese Government removed retrospective provisions from the Strengthening the foreign resident CGT regime legislation.
This change is a win for the Australian mining industry which had recommended that the government remove retrospectivity, as its inclusion would put in doubt the CGT treatment of every transaction by a foreign company with investments in Australia over the last 20 years.
Backdated legislation contravenes many of the principles of equity, good legal practice and tax systems – undermining confidence and introducing uncertainty as to how investments will be treated.
The new rules will now apply prospectively to extend the reach of CGT to transactions involving significant interests (greater than 10%) in Australian companies or company groups held by foreign residents.
CGT will apply where the real property holdings (being land and related assets, including mining and other related rights) of Australian companies exceed more than half of the value of their total assets.
The legislation moves to extend the scope of real property to include personal rights, licences and contracts exercisable over land and includes, not only assets fixed on land, but assets “installed” on land and water entitlements.
The Explanatory Memorandum to the legislation appears to exclude mobile equipment such as draglines and underground longwalls.
The extension of scope will mean that more transactions involving interests in Australian mining groups will be caught by CGT under the 50% asset test.
The new 365-day rule will also constrain the ability of Australian groups to restructure their assets prior to changes in foreign ownership.