In April 2026, we considered the Federal Government’s proposed reforms to Australia’s foreign resident capital gains tax (CGT) regime and the implications for foreign investment in Australia’s renewable energy sector, within our article New Energy Bulletin: Reforms to the foreign resident capital gains tax regime. The proposed changes had sought to materially expand the circumstances in which foreign investors would be subject to CGT in Australia, affecting Australia’s attractiveness as a destination for foreign capital. In addition, certain amendments to the meaning of ‘real property’ were intended to apply retrospectively and prospectively, extending to past, current and future transactions. Transitional relief would be available only for a limited class of renewable energy assets, and only until 2030.
On 10 September 2026, the Federal Government passed legislation to extend the concessional CGT treatment for eligible renewable energy investments from 30 June 2030 to 30 June 2040.
The concession operates as a 50% CGT discount on qualifying gains. For a foreign corporate investor otherwise subject to Australian tax at 30%, this can produce an effective tax rate of 15% on the qualifying capital gain.
The change is intended to better reflect the longer investment horizons typical of renewable energy projects and substantially improves the position for foreign investors seeking to deploy long-term capital into the Australian market.
What does this mean for renewable energy investors?
The extension to 2040 is a positive development for foreign investment in Australia’s energy transition.
The original 2030 sunset created a mismatch with renewable energy investment horizons. A project entering development today may take several years to reach financial close, construction and operations, making an exit before 2030 unrealistic for many investors.
The extension to 2040 should allow investors to incorporate the concession into long-term investment, valuation and exit modelling with considerably greater confidence.
This is particularly relevant for infrastructure funds, pension and sovereign investors, strategic developers and other investors whose business models rely on developing, operating and ultimately recycling capital from renewable energy assets.
The concession should also improve after-tax exit economics. Although the reforms broaden Australia’s taxing rights over renewable energy assets, the 50% discount materially reduces the economic impact for qualifying investments.
That may in turn support valuations and secondary market liquidity by reducing the tax drag that would otherwise apply to foreign investors exiting Australian renewable energy assets.
For more information, please contact Tim McAlpine-Scott, Seema Sandhu, Mark Payne or Jo Ruitenberg.
