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  • How changing residency affects CGT

    If you become an Australian resident for tax purposes, or stop being one, the assets on which you pay capital gains tax (CGT) in Australia will change.

    Your residency for tax purposes may be different to your residency for citizenship or visa purposes. If you are not sure, check your tax residency status.

    On this page

    Becoming an Australian resident

    When you become an Australian resident (other than a temporary resident), you are taken to have acquired your CGT assets at the same time, for their market value at that time. This is sometimes called 'deemed acquisition'.

    This does not apply to assets:

    • you acquired before CGT started on 20 September 1985
    • that were taxable Australian property, such as real estate in Australia and assets used to carry on a business in Australia. The general cost base rules apply to taxable Australian property.

    If you stop being an Australian resident

    If you stop being an Australian resident, you are taken to have disposed of assets that are not taxable Australian property for their market value at the time you stopped being a resident. This is sometimes called 'deemed disposal'.

    The same applies if you stop being a resident trust for CGT purposes.

    If you have any indirect Australian real property interests, or options or rights to acquire such interests, you are taken to have immediately re-acquired these assets for their market value.

    Exemption for temporary residents

    If you are a temporary resident when you stop being an Australian resident, you are not taken to have disposed of any of your assets.

    Anyone who is an Australian resident for tax purposes after 6 April 2006 but is not a temporary resident cannot later become a temporary resident, even if they later hold a temporary visa.

    Choosing to disregard capital gains and losses

    An individual can choose to disregard all capital gains and losses when they stop being an Australian resident for tax purposes.

    If you do this, your assets are taken to be taxable Australian property until the earlier of:

    • a CGT event happening to the assets (for example, their sale or disposal)
    • you again becoming an Australian resident.

    The effect of this choice is that the increase or decrease in the value of your assets after you stop being a resident is taken into account in working out your capital gains or losses on those assets. You do not need to tell us what you decide – the way you prepare your tax return is generally sufficient evidence of your choice.

    If you stop being a temporary resident

    If you stop being a temporary resident and remain an Australian resident, you are taken to have acquired your CGT assets that are not taxable Australian property for their market value at the time you stopped being a temporary resident.

    This rule does not apply to employee shares and rights.

    Example: becoming an Australian resident

    Fred has lived most of his life in London. He is single. He owns several apartments in and around London that are leased to tenants. He also has a share portfolio that provides him with regular dividend income.

    On 12 December 2011, Fred arrived in Brisbane to begin work with an Australian company. For the first 3 years Fred held a temporary visa and expected to eventually return to the United Kingdom. During this period he was a temporary resident as he held a temporary visa and met the other criteria for being a temporary resident.

    On 15 March 2016 Fred applied for, and was granted, permanent residency in Australia.

    The CGT implications for Fred are as follows.

    For assets disposed of between 12 December 2011 and 14 March 2016

    Fred was a temporary resident and was only subject to CGT in Australia on any assets that were taxable Australian property.

    For assets disposed of on or after 15 March 2016

    Fred is an Australian resident and is now subject to tax in Australia on his worldwide income and capital gains. Any capital gains or capital losses Fred makes on the assets held in the UK will be subject to CGT in Australia. The cost base for these assets will be set according to the market value of the assets on 15 March 2016. Fred will receive a foreign tax credit for any tax paid in the UK on these gains.

    End of example
    Last modified: 04 Aug 2021QC 66059