Leaving Australia Tax Residency Cgt

---
name: leaving-australia-tax-residency-cgt
description: "Ceasing Australian tax residency triggers one of tax's strangest decisions — CGT event I1 deems you to sell your entire share portfolio the day you leave, unless you elect otherwise. Add the loss of the main-residence exemption for non-residents, the death of the tax-free threshold, HECS repayments that chase worldwide income, and super you cannot touch, and 'moving overseas' becomes a sequencing problem. This Guide sequences it."
license: "AGPL-3.0-or-later (code) / OpenAccountants Guide License v1.0 (content)"
metadata:
  source: openaccountants
  openaccountants_url: "https://www.openaccountants.com/skills/leaving-australia-tax-residency-cgt"
  jurisdiction: "AU"
  tax_year: "2025"
  last_updated: "2026-09-26"
---

# Leaving Australia: residency, the CGT departure choice, and what follows you

**Why this corridor needs a guide.** Australians leave in large numbers — to the UK, the
Gulf, Singapore, the US — and the departure rules are unusually decision-heavy: the day you
cease residency, the law **deems you to have sold your non-property assets** (unless you
choose otherwise), your **family home quietly loses its lifetime tax exemption** if you sell
while away, the **tax-free threshold disappears** for the Australian income you keep, and
your **HECS debt starts chasing your foreign payslip**. None of these are avoidable by
ignorance and all of them are manageable by sequencing. Our own connector data shows
capital-gains questions from Australia going unanswered more than almost anywhere — this
Guide is the answer's backbone.

**Who it's for.** Australian residents (citizens and long-term residents) moving abroad, and
their accountants. Rules stated for the 2025-26 income year; the residency-law modernisation
announced years ago (the 45-day bright-line proposal) **remains unlegislated** — the old
tests still govern, but watch this space before relying on edge cases.

## Part 2 — CGT event I1: the deemed disposal, and the election

The centrepiece. On ceasing residency, **CGT event I1** deems you to dispose of all your CGT
assets **except taxable Australian property (TAP)** — broadly, Australian real estate and
mining interests, plus significant stakes (10%+) in land-rich entities — at market value on
the cessation date. Your share portfolio, managed funds, foreign assets, crypto: all deemed
sold, gains taxable in your final resident return, *without any cash changing hands*.

**The election (the "I1 choice"):** you may instead elect to treat those assets as TAP —
**deferring** tax until actual sale, but keeping those assets inside the Australian CGT net
while non-resident, with two costs baked in:
- the **50% CGT discount is frozen** for periods of foreign residency (post-May-2012
  apportionment), so long absences erode the discount on eventual sale; and
- Australia taxes the *entire* eventual gain, even growth that happened while you lived in a
  country that would not have taxed it.

**How to choose, honestly:**

| Situation | Lean |
|---|---|
| Large unrealised gains, no cash to pay a dry tax bill | Elect (defer) — but diarise the discount erosion |
| Modest gains, or losses available to absorb them | Pay on I1 — a clean exit; future growth is Australia-free |
| Moving to a zero-CGT country (UAE, Singapore, NZ for most assets) **long-term** | Pay on I1 — post-departure growth then escapes both countries |
| Likely to return within a few years | Election matters less — returning residents' assets re-enter the net anyway; model both |

There is no single right answer; there *is* a right process — a market-value schedule of every
asset on the cessation date (you need it under either path), then the two computations side by
side. The election is made by how you complete the return, so the decision belongs to the
departure-year filing, not to memory.

---

## Part 3 — The house: the main-residence exemption ambush

The harshest rule on this corridor, and the least known: since the 2019 changes, a person who
is a **foreign resident at the time they sell** their former Australian main residence gets
**no main-residence exemption at all** — not a reduced one; **none**, reaching back over the
entire ownership period. The narrow "life events" carve-out (death, terminal illness, divorce
within a 6-year window) rarely helps a planned move.

**The sequencing consequences:**
- **Selling? Sell while still resident** (contract date governs), or move back into residency
  before selling. The same sale, contracted a month after cessation, can swing from tax-free
  to a six-figure CGT bill.
- **Keeping and renting it out?** The old 6-year absence concession only pays off if you are
  *resident again* when you eventually sell. Get a **valuation at first rental** (the
  home-first-used-to-produce-income rule resets the cost base) and hold the evidence.
- Any sale as a non-resident also meets **foreign-resident capital gains withholding** —
  the purchaser withholds **15%** of the price (threshold removed from 2025 — it applies to
  effectively all Australian property sales by foreign residents) — recovered, if excessive,
  only through the return.

---

## Part 4 — What follows you abroad

- **HECS/HELP debt does not stay home.** Moving overseas obliges you to notify the ATO
  (myGov), lodge an **overseas travel notification**, and report **worldwide income**
  annually; repayments apply once income crosses the repayment threshold, computed on your
  global earnings. Silence compounds into penalties; the debt also now accrues indexation
  against you while you ignore it.
- **Superannuation is a one-way lockbox.** Citizens and permanent residents **cannot**
  withdraw super on departure (the DASP refund exists only for temporary-visa holders). The
  balance stays invested under Australian rules until preservation age. Planning notes:
  consolidate before leaving, check insurance inside super (often lapses or becomes
  poor value for non-residents), be careful with **SMSFs** — a trustee moving abroad can break
  the fund's Australian-residency conditions and render it non-complying (penalty tax at the
  top rate on the fund); professional trustees or winding up are the standard fixes.
- **Australian-source income keeps its own rules:** rent (taxable by assessment at
  non-resident rates; negative-gearing losses carry forward), **fully franked dividends**
  (no further Australian tax for non-residents — franking does the job; unfranked: 30%
  withholding, treaty-reduced), **interest** (10% final withholding). Bank and broker
  paperwork: update tax-residency declarations so the right withholding applies at source.
- **Employee share schemes** straddling the move are apportioned between countries by
  sourcing rules — flag any unvested equity to both ends' advisers *before* the move; the
  deferred-taxing-point rules interact badly with surprise.

---

## Part 5 — The destination layer (briefly)

Australia has treaties with the major destinations (UK, US, Singapore; **none with the
UAE** — double-non-taxation is the point there, but also no treaty tie-breaker if statuses
collide). Two destination-specific notes our corridor data keeps surfacing:
- **AU→UK**: the UK taxes arrivals under its own SRT from day one; the old remittance basis
  is gone (FIG regime now — 4 years of foreign-income relief for genuinely new arrivals).
  Australian franked dividends lose their magic in UK hands; super interacts with UK pension
  rules unglamorously. Sequencing bonuses and I1 decisions around the UK arrival year is
  standard.
- **AU→UAE/Singapore**: no local tax on the salary; the whole game is the Australian exit
  done cleanly (Parts 1–4) — and evidence, because a "permanent place of abode" in Dubai is
  exactly what the domicile test wants to see documented.

---

## Part 6 — Sequenced checklist

**Before the move**
1. Build the residency-cessation evidence plan (lease/purchase abroad, family, home
   let/sold arm's-length, closures) and pick the intended **cessation date**.
2. Market-value every CGT asset for that date; run the **I1 pay-vs-elect** comparison.
3. Decide the **house** strategy while still resident: sell now (exempt), or rent with a
   first-income valuation and a documented plan for the eventual sale.
4. Time income: bonuses/invoices before cessation use the resident thresholds; after, 30%
   from dollar one.
5. Super: consolidate, review insurance, fix SMSF trusteeship.

**Departure year**
6. Final part-year return: cessation date declared, I1 position taken, market-value schedule
   retained.
7. ATO overseas-travel notification for HECS; diarise the annual worldwide-income report.
8. Update banks/brokers/registries to non-resident withholding status.

**While away**
9. File Australian returns whenever Australian-source assessable income exists (rent, most
   commonly); watch the 15% purchaser-withholding on any property sale.
10. Before any *return* to Australia: assets acquired abroad enter the CGT net at
    market value on resuming residency — realise or re-base deliberately, and re-run the
    house plan if it was rented out.

---

## The trap list

| Trap | Why it bites |
|---|---|
| "I'll figure out I1 later" | The deemed disposal happens at the cessation date by law; the only question is whether you computed it. Un-elected and unreported is an audit, not a strategy. |
| Selling the family home from abroad | Main-residence exemption vanishes entirely for foreign-resident vendors — the single most expensive surprise on this corridor. |
| Electing deferral, forgetting the discount freeze | Years abroad shave the 50% discount on eventual sale; the deferral isn't free. |
| SMSF trustee on a plane | Residency conditions breach → non-complying fund → top-rate tax on the fund's assets. |
| HECS silence | Worldwide-income reporting is mandatory; the debt indexes and penalties accrue while you look away. |
| Bonus paid a week after cessation | Non-resident rates from the first dollar; timing was worth thousands. |
| Assuming a UAE treaty exists | There is none — no tie-breaker to rescue a messy dual-status year. |
| Returning with an offshore portfolio, no re-basing plan | Market-value entry on resuming residency is automatic; realising gains just before return (in a zero-tax country) versus just after is a five-figure difference. |

---

## Part 7 — Details that change the answer

The Parts above give the shape of the decision. These points, checked against the primary
sources on 8 September 2026, are the ones that most often change the number.

- **The residency date comes from the facts.** Apply all four tests in TR 2023/1 and record
  homes, family, employment, travel, conduct and intentions. An overseas lease or job does not
  end residency by itself, and the cessation date cannot be chosen for a preferred tax result.
  [TR 2023/1](https://www.ato.gov.au/law/view/document?docid=TXR/TR20231/NAT/ATO/00001)
- **I1 excludes less than "all TAP".** Section 104-160 excludes Australian real property,
  permanent-establishment assets and rights or options over them; an indirect Australian real
  property interest can remain inside the event. Prepare a cessation-date schedule of ownership,
  acquisition dates, cost bases, reduced cost bases and supported market values. [ITAA 1997 (Cth) s 104-160](https://www.ato.gov.au/law/view/document?docid=PAC/19970038/104-160)
- **The choice is all or nothing.** The section 104-165 choice covers every affected asset, not
  selected winners or losers, and paying I1 does not guarantee that all future gains escape
  Australian tax. Compare the immediate tax and cash requirement with later Australian and
  destination-country tax, including losses, likely disposal dates, the foreign-resident discount
  restriction, treaty effects and foreign tax relief. [ITAA 1997 (Cth) s 104-165](https://www.ato.gov.au/law/view/document?docid=PAC/19970038/104-165)
- **Events from 1 July 2027.** Apply the enacted CGT changes and their transitional rules before
  extending any comparison past that date. [Treasury Laws Amendment (Tax Reform No. 1) Act 2026](https://www.legislation.gov.au/C2026A00049/asmade/text)
- **The home, precisely.** The life-events exception needs a continuous foreign-resident period
  of six years or less plus a specified terminal illness, death or relationship breakdown; the
  ordinary six-year absence rule does not overcome the foreign-resident restriction. If the home
  is rented, keep occupation and rental dates and establish whether the first-income-use market
  value rule applies; not every conversion to rental resets the cost base. [ITAA 1997 (Cth) s 118-110](https://www.ato.gov.au/law/view/document?docid=PAC/19970038/118-110)
- **Withholding is a credit.** For contracts from 1 January 2025 the purchaser withholds 15%
  with no value threshold; the amount is credited in the return, and a variation is applied
  for before settlement. [ATO, FRCGW overview](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/foreign-resident-capital-gains-withholding/foreign-resident-capital-gains-withholding-overview)
- **Study loans: seven days.** HELP, VSL and AASL borrowers who intend to live overseas for 183
  days or more in any 12-month period must submit the overseas travel notification and update
  contact details within seven days of leaving, then report worldwide income or lodge the
  non-lodgment advice each year. [ATO, Overseas repayments](https://www.ato.gov.au/overseasrepayments)
- **DASP excludes more than citizens.** Departure alone releases nothing. DASP needs its temporary
  visa, departure and eligibility conditions, and Australian and New Zealand citizens and
  Australian permanent residents are excluded. Check the ordinary conditions of release and the
  fund's insurance terms separately. [ATO, DASP](https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/temporary-residents-and-superannuation/departing-australia-superannuation-payment-dasp)
- **SMSF: three conditions, and the two years are a limit.** Review establishment or Australian
  assets, central management and control ordinarily in Australia, and the active member test.
  The temporary-absence treatment does not authorise managing the fund overseas for two years,
  and appointing a nominee does not settle where decisions are made. Resolve the arrangements
  before departure. [ATO, Check your fund is an Australian super fund](https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/setting-up-an-smsf/check-your-fund-is-an-australian-super-fund)
- **Income in the departure year.** Apply the part-year tax-free threshold and classify each
  receipt by timing, source and treaty. A bonus paid after departure is not automatically taxed at
  a flat 30%, an overseas employer does not by itself make salary foreign-source, rental income can
  remain assessable with eligible deductions rather than losses that must be carried forward, and
  investment income may fall under withholding rather than assessment. Tell banks, registries and
  payers when residency changes.
- **Coming back.** Section 855-45 resets the first cost base element to market value for relevant
  assets when an individual becomes resident, but it excludes taxable Australian property and
  pre-CGT assets and has further qualifications; assets kept inside TAP through the departure
  choice get no universal reset. Employee share scheme interests have their own rules. [ITAA 1997 (Cth) s 855-45](https://www.ato.gov.au/law/view/document?docid=PAC/19970038/855-45)
- **The destination.** Determine the destination's residency, employment, investment and pension
  rules directly. Singapore, for one, taxes employment exercised there for an overseas employer;
  do not assume the salary is exempt.

---

## Sources (primary, verify current figures)

ITAA 1997 s.104-160 (CGT event I1) and the TAP definition (s.855); ATO guidance on residency
(TR 2023/1, incorporating Harding); main-residence exemption denial for foreign residents
(2019 amendments + life-events test); 50% discount apportionment for foreign residents
(post-8 May 2012); foreign-resident capital gains withholding (15%, threshold removed from
1 Jan 2025); non-resident tax rates 2025-26; HECS/HELP overseas obligations (ATO overseas
levy); DASP rules (temporary residents only); SMSF residency conditions; franking/withholding
treatment of non-resident investors; Australia's treaty network (and the absence of an
AU–UAE income-tax treaty); UK FIG regime for the AU→UK leg.

Part 7 cites ITAA 1997 sections 104-160, 104-165, 118-110 and 855-45 on the ATO legal database,
TR 2023/1, the ATO pages on foreign resident capital gains withholding, overseas study loan
repayments, DASP and SMSF residency, and the Treasury Laws Amendment (Tax Reform No. 1) Act 2026.

---

*Built for the OpenAccountants migration desk. Leaving Australia is a set of decisions with
dates attached — the I1 choice, the house, the bonus, the SMSF — and every one of them prices
differently on either side of a single cessation date. Fix the date, then sequence everything
around it, with a named accountant on each end.*

## Today's figures and who stands behind this skill

This file is an AI skill (tax rules your AI follows) from OpenAccountants, copied on 2026-09-26. Rates, thresholds and deadlines change. For the current version of this skill, its official sources and the named accountant (if any) who stands behind it, call `get_skill` with slug `leaving-australia-tax-residency-cgt` on the OpenAccountants connector (https://www.openaccountants.com/connect), or read https://www.openaccountants.com/skills/leaving-australia-tax-residency-cgt. If neither is available, confirm every figure against the official source pages cited above before relying on it.