You might be leaving for a job, for family, or for a quieter life somewhere warmer. Either way there is a date on the ticket, and for tax that date can matter as much as any sale you make. Some of what you own is treated as sold on the day you go. Some of it stays in the Australian tax system until you actually sell it.
It turns on residency, not your passport
Capital gains tax follows your tax residency. The test asks whether you reside in Australia, and it has three more limbs: where your permanent home (your domicile) is, whether you are here for more than half the year, and membership of certain Commonwealth super schemes. It does not ask about your citizenship or your visa.
So an Australian citizen can stop being a resident for tax, and someone who is not a citizen can be one. The day your residency ends is the day the rules below start to work.
The day you leave: CGT event I1
When you stop being an Australian resident, CGT event I1 treats you as selling most assets, such as shares, at market value on the day you leave. You can choose instead to defer the tax until you sell. Australian real estate is outside I1: it stays taxable, and is taxed when you sell it.
In other words, nothing changes hands, but a gain (or a loss) is worked out as if it had. If your shares are worth more on the day you leave than they cost you, that difference is a capital gain for the year you leave.
The choice to defer
If you are an individual, you can choose not to have I1 apply. The choice is all or nothing: it covers every asset I1 would have reached, not just the ones you pick.
Those assets then stay inside the Australian tax system. Each is treated as taxable Australian property until the earlier of two things: you sell it (or otherwise stop owning it), or you become an Australian resident again.
The choice has a deadline. It is made by the day you lodge your tax return for the year you left, or later if the Commissioner allows.
Deferring is not the same as avoiding. It moves the tax from the day you leave to the day you sell, so the gain is measured over a longer time, in markets you cannot see yet.
Your Australian property stays in the system
A foreign resident pays capital gains tax in Australia only on taxable Australian property, and real property in Australia is on that list. So I1 skips your Australian house, unit or land: nothing is taxed on the day you leave, and the gain is taxed when you sell.
What changes is the discount. The CGT discount is cut for the days after 8 May 2012 that you spent as a foreign or temporary resident. The longer you own the property from overseas, the smaller the share of the gain that gets the discount.
The family home
The main residence exemption usually keeps the sale of your home free of capital gains tax. If you sell while you are a foreign resident, it does not apply, with one narrow exception.
The exception, called the life events test, needs both of these: you have been a foreign resident for six years or less in a row, and one of these happened during that time:
- you, your spouse or your child under 18 had a terminal medical condition;
- your spouse, or your child under 18, died;
- the sale happens because of a court order or a binding financial agreement after your marriage or relationship with your spouse breaks down.
After more than six years in a row as a foreign resident, the exemption does not apply at all.
When you sell from overseas
When a foreign resident sells Australian real estate, the buyer must hold back 15% of the price and pay it to the ATO. There is no minimum price: it applies to a small unit as much as to a large house.
Assets bought before 20 September 1985
Assets you have owned since before 20 September 1985 have always been outside I1. A change that applies from 1 July 2027 treats those assets as sold just before that date and bought back just after. On our reading of the Act, if you leave after 30 June 2027, I1 can reach them, with the gain measured from their market value just before 1 July 2027. The ATO has not said this.
What people usually work out before they go
Most people who handle this well have a list in front of them before the ticket is booked:
- which of their assets I1 would reach, and what each is worth now;
- whether deferring suits them, knowing it covers everything or nothing;
- what their property, and their home, would mean if sold from overseas;
- how long they expect to be away, and whether they will come back.
An accountant who knows both countries can put numbers against that list.
A ticket has one date on it. For tax, that date lands on everything you own.
If you would like to see how your own position looks before you go, book a first conversation.
Nicholas Lockhart
Rules as at 25 October 2026 (Income Tax Assessment Acts 1936 and 1997, and the Taxation Administration Act 1953). General information only, not personal or financial advice.