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

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

Establish when Australian tax residency ceases before modelling departure tax. Moving overseas can affect capital gains, a former home, continuing Australian income, study loans and superannuation. This guide covers individual departures and CGT events before 1 July 2027, using sources checked on 8 September 2026.

Establish the residency date from the facts

• Establish the residency date from the facts — Apply all four individual residency tests. Record homes, family arrangements, employment, travel and the person's conduct and intentions. An overseas lease or job does not automatically end Australian residency, and the taxpayer cannot choose a cessation date solely for a preferred tax result. If two countries treat the person as resident, examine the actual treaty and its effect. (ATO: TR 2023/1)

Classify the year's income by timing, source and applicable exemptions or treaty provisions. Apply the part-year tax-free threshold where appropriate. A bonus paid after departure is not automatically taxed at a flat 30%, and an overseas employer does not by itself make salary foreign-source or exempt.

Calculate CGT event I1

CGT event I1 happens when residency ceases. Prepare a cessation-date asset schedule with ownership, acquisition dates, cost bases, reduced cost bases and supported market values. Its exclusions cover specified Australian real property, permanent establishment assets and rights or options over those assets. They do not exclude every category of taxable Australian property. In particular, indirect Australian real property interests require separate consideration.

• Compare market value with cost base for affected assets — For affected assets, compare cessation-date market value with the relevant cost base or reduced cost base and apply exemptions and concessions. Check temporary resident rules separately. I1 can create a tax liability without a sale generating cash. (ITAA 1997, section 104-160)
• Choice to disregard I1 gains and losses — An individual may choose to disregard all gains and losses covered by I1. This choice applies across the affected assets, rather than to selected assets. Those assets are then treated as taxable Australian property until the earlier of a relevant ownership-ending CGT event or resumption of Australian residence. (ITAA 1997, section 104-165)

Compare the immediate tax and cash requirement with later Australian and destination-country tax under the choice. Include available losses, likely disposal dates, foreign resident discount restrictions, treaty effects and foreign tax relief. A departure choice is not automatically preferable because it defers payment, and paying I1 does not guarantee that all future gains escape Australian tax.

• CGT changes for events from 1 July 2027 — For events from 1 July 2027, apply the enacted CGT changes and transitional rules before extending the comparison. (Treasury Laws Amendment (Tax Reform No. 1) Act 2026)

Review the former home before contracting to sell

• Main residence exemption for foreign residents — If the seller is a foreign resident at the relevant CGT event, the main residence exemption is generally unavailable. The life events exception requires a continuous foreign-resident period of six years or less and specified terminal illness, death or relationship breakdown circumstances. The ordinary six-year absence rule does not itself overcome the foreign-resident restriction. (ITAA 1997, section 118-110)
• Rented home and foreign resident capital gains withholding — If the home is rented, keep occupation and rental dates and establish whether the first-income-use market value rule applies. Do not presume that every conversion to rental resets cost base. For a sale, also check the purchaser withholding procedure and any variation before settlement. For property contracts from 1 January 2025, withholding is generally 15% without a property value threshold. The amount is credited against final tax. % (property contracts from 1 January 2025; no property value threshold) (ATO: FRCGW overview)

Deal with obligations that continue overseas

Rental income may remain assessable in Australia. Apply eligible deductions and loss rules rather than assuming every rental loss must be carried forward. Investment income may be subject to withholding rules instead of ordinary assessment. Tell banks, registries and other payers when tax residency changes so they can apply the appropriate treatment.

• HELP, VSL and AASL overseas reporting obligations — HELP, VSL and AASL borrowers have overseas reporting obligations. If intending to live overseas for 183 days or more in any 12-month period, submit the overseas travel notification and update contact details within seven days of leaving. Report worldwide income or lodge the applicable non-lodgment advice each year. Use the ATO's rules for someone whose plans change while away and the repayment thresholds for the relevant year. (ATO: overseas loan obligations)
• Departing Australia superannuation payment (DASP) — Departure alone does not release preserved superannuation. DASP is available only where its temporary visa, departure and other eligibility conditions are satisfied. 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: departing Australia superannuation payment)
• SMSF residency conditions — For an SMSF, review all three residency conditions: establishment or Australian assets, central management and control ordinarily in Australia, and active members. The temporary absence treatment for central management and control does not authorise permanently managing the fund overseas for two years. Appointing a nominee does not settle where decisions are actually made. Resolve the fund's arrangements before departure. (ATO: SMSF residency)

Check the destination and any return to Australia

Determine the destination's residency, employment, investment and pension rules directly. Do not assume that Singapore exempts salary earned from working there for an overseas employer; IRAS identifies such employment as taxable in Singapore.

• Cost base reset on becoming resident (section 855-45) — Before returning, classify each asset again. Section 855-45 generally resets the first cost base element to market value for relevant assets when an individual becomes resident, but excludes taxable Australian property and pre-CGT assets and has further qualifications. Assets kept within TAP through the departure choice do not receive a universal market value reset on return. Employee share scheme interests also have specific exceptions. (ITAA 1997, section 855-45)

Retain the residency evidence, valuation schedule, I1 comparison and choice, home calculations, notifications and annual reporting dates. Update the record if living arrangements or the intended length of absence change.

Contributed by Ryan Duguid.