Investors welcome renewable CGT transition extension to 2040

Australia's largest investors and renewable energy developers have welcomed changes to the Federal Government's capital gains tax regime for foreign investment in renewable energy, saying the extended transition will help maintain the flow of global capital into the sector.

The government has amended its proposed capital gains tax arrangement to extend the 50% discount on CGT paid by international investors in renewable energy projects from 2030 to 2040.

The extension is intended to better align the tax transition with Australia's clean energy ambition, with investors warning a shorter transition could have discouraged new investment at a time when significant capital is required to expand renewable energy supply.

Independent modelling by Mandala Partners, commissioned by the Investor Group on Climate Change and the Clean Energy Investor Group provided to Treasury, found extending the transition period by 10 years would significantly reduce the potential chilling effect of the new tax on renewable investment.

The modelling also indicated the longer transition would improve the likelihood of Australia meeting its renewable energy and emissions reductions targets.

Investor Group on Climate Change policy director Francesca Muskovic said the change avoided an unnecessary barrier to investment.

"This change avoids what would have been an unforced error in cruelling desperately needed investment - to drive down pressure on energy prices and help grow new industries supported by cheap clean energy," Muskovic said.

She said the Treasurer's decision to better align the tax regime with the energy transition would reduce uncertainty for investors as Australia seeks accelerate new clean energy supply.

Clean Energy Investor Group chief executive Richie Merzian said Australia was competing globally for capital to fund the energy transition.

"Australia's energy transition is competing for global capital with other countries, and the commitment from the Treasurerto amend the Bill will ensure Australia remains a competitive investment destination," Merzian said.

More than 70% of investment into Australian clean energy comes from international sources, according to the Clean Energy Investor Group.

The groups said further changes, including grandfathering existing renewable energy investments, would provide additional certainty for foreign investors.

"We will continue to work constructively and persistently with the Government to ensure regulatory settings deliver greater equity and certainty for foreign investors relative to their domestic counterparts," Merzian said.