Leaving Australia: Residency Tests and CGT When You Go

A Sydney product manager took a Singapore offer, rented out her apartment, and kept her share portfolio exactly as it was. Two years later the ATO asked a simple question: when did she stop being a resident, and where was the CGT event I1 in her return? She had never heard of it. The rules had deemed her portfolio sold the day she left, and the silence in her return was now a problem with interest.

First hurdle: actually ceasing residency

Australia decides residency with four tests, and meeting any one keeps you resident:

• The resides test: the primary test, based on ordinary concepts. Where is your life: dwelling, family, job, social and economic ties, physical presence, intention.
• The domicile test: Australian domicile keeps you resident unless your permanent place of abode is outside Australia. Serial nomadism without a fixed base abroad has repeatedly failed this test in court.
• The 183-day test: presence for more than half the income year, subject to usual-place-of-abode exceptions.
• The Commonwealth superannuation test: for certain government employees.

One myth to retire: the bright-line 183-day rule proposed in the 2021 federal budget was still not law as of mid 2026. Departures are judged under the tests above, which means facts and documentation (a lease abroad, family location, resignation letters, shipping receipts) decide the date your residency ends. That date is not cosmetic: it is the valuation date for everything that follows.

CGT event I1: the deemed disposal

The moment you cease residency, CGT event I1 fires. The ATO deems you to have sold, at market value, every CGT asset you own except taxable Australian property (TAP):

The gains land in your final resident return. The 50% CGT discount applies to assets held more than 12 months, which softens the blow considerably. Assets bought before you first became an Australian resident, and gains that accrued before arrival, have their own base rules worth checking asset by asset.

The election: pay now or stay in the net

Instead of paying on the deemed disposal, you can elect to treat the affected assets as TAP. Consequences:

• No tax on departure: the gain is deferred until you actually sell.
• The assets stay inside Australian CGT indefinitely, even while you live abroad.
• When you sell as a non-resident, you face non-resident rates and, broadly, no 50% discount for the non-resident holding period.

The election is all-or-nothing across the affected assets and is effectively locked in by how you file. Paying I1 tax now buys a clean break and a fresh start (valuable if you are moving to a country that does not tax gains); electing defers cash but chains your portfolio to the ATO. The right answer is arithmetic: expected growth, destination country taxation, and your liquidity today.

The other departure traps

• The family home: foreign residents generally lose the main residence CGT exemption if they sell while non-resident (limited life-event exceptions apply within 6 years). Selling before versus after ceasing residency can flip the sale from exempt to taxable from day one of ownership.
• Rental property: stays taxable in Australia; non-resident rates apply with no tax-free threshold.
• Superannuation: stays in the Australian system; you generally cannot access it early by emigrating (unlike temporary residents). It keeps growing under Australian rules until preservation age.
• HECS/HELP debt: follows you abroad; non-resident repayers must declare worldwide income to the ATO annually.
• Part-year returns: your final resident return covers a split year, with the tax-free threshold prorated.

The clean-exit sequence

1. Fix the residency cessation date with evidence: foreign lease or purchase, family relocation, employment start, flight out.
2. Value the portfolio and crypto at that date; gather 12-month holding evidence for the discount.
3. Model both I1 paths (pay now vs TAP election) against your destination's tax system.
4. Decide on the family home with the main residence rules in front of you, not after the fact.
5. File the final part-year return with the I1 outcome disclosed, and update your details with banks and brokers as a non-resident.

Frequently asked questions

This content is informational and educational. It does not constitute legal or tax advice. Verify current legislation and consult a specialist about your case before making decisions.