Retrospective changes to CGT labelled as ‘bad policy’

A major Australian accounting firm has accused the Federal Government of “undermining certainty in the tax system”.

CPA Australia has raised serious concerns about the government’s draft legislation on foreign resident capital gains tax, saying it risks certainty by retrospectively reopening transactions dating back to 2006.

Jenny Wong, tax lead for CPA Australia, said the proposed amendments went well beyond clarification and amounted to a material policy shift.

“This is not mere clarification, it is a policy change,” Wong said. 

The draft legislation proposes to retrospectively apply changes back to 2006, effectively altering the tax treatment of transactions entered into in good faith under the law as it was understood at the time.

“Retrospective tax changes of this scale fundamentally undermine certainty in the tax system.”

Wong said investor confidence relies on stable and predictable tax settings, not retrospective risk.

“Applying new interpretations of the law back to 2006 sends a clear signal that the rules can change after the fact and that makes Australia a less attractive place to invest,” Wong said. 

CPA Australia is concerned the changes could expose taxpayers to unexpected liabilities, including penalties and general interest charge, many years after transactions were completed.

“Reaching back almost 20 years to reopen settled transactions is deeply problematic,” she said.

Wong warned the proposal echoed past tax changes that created prolonged uncertainty and disputes.

“This feels like the family trust election all over again, only worse.”

CPA Australia also criticised the short consultation period as wholly inadequate given the complexity and retrospective nature of the changes, limiting the ability to fully assess the implications for historic transactions, long-term investments and commercial structures.

“Two weeks is not meaningful consultation, It’s completely insufficient for reforms of this magnitude. This is a major shock for foreign investors and the professionals who advise them,” Wong said. 

She said retrospective application risked increasing disputes and compliance costs, creating inefficiency for both taxpayers and the Australian Taxation Office.

“Reopening historic positions benefits no one and wastes resources on all sides.”

While CPA Australia acknowledged the government’s intent to provide transitional relief for certain renewable energy investments, Wong said this did not address the broader policy concerns.

“Targeted carve outs don’t fix the bigger problem and retroactive tax law is bad policy. If change is needed, it should apply prospectively and be developed through proper consultation,” Wong said. 

CPA Australia will engage constructively with Treasury but said any final reforms must strike the right balance between protecting revenue and maintaining investor confidence.

“Tax integrity depends on trust, certainty and fairness. Once those are damaged, they’re hard to rebuild. This proposal puts all three at risk,” Wong added.