Exit Tax in Australia: What Happens When You Move Overseas

Booking the flight is the easy part. Australia's exit tax is the part most people discover afterwards, usually when an accountant asks what their share portfolio was worth on the day they left the country.

This guide explains how the exit tax works when you move overseas, the two choices available once it applies, and why a capital gains change taking effect on 1 July 2027 has made that choice considerably harder than it used to be.

What the Exit Tax Actually Is

When you stop being an Australian tax resident, the law treats you as having sold certain assets at their market value on that day. The technical name is CGT event I1. Capital gains tax (CGT) is the tax on the profit made when an asset is disposed of, and here you have not disposed of anything; the law simply deems that you have. Any gain or loss then goes into your final Australian tax return.

The rule applies to assets that are not taxable Australian property (TAP). TAP is mainly Australian real property and closely related interests, and it stays inside the Australian tax net whether you live here or not. Your Australian house or rental property is therefore not caught by the deemed disposal, while listed shares, foreign shares, cryptocurrency, and overseas property generally are.

There is one significant exception. If you were a temporary resident at the time you ceased Australian tax residency, the deemed disposal does not apply to you at all.

One further point deserves emphasis, because it causes more trouble than the exit tax itself. Leaving the country does not by itself end your tax residency. The ATO applies four tests set out in Taxation Ruling TR 2023/1, and the answer turns on your circumstances as a whole rather than on your departure date or your new visa. The ATO's tax residency guidance is the place to start.

Your Two Choices, and Why Timing Now Matters

Pay on departure

The default position is that the gain crystallises when your residency ceases. You establish the market value of each affected asset on that date, compare it against the cost base, and report the result in your departure-year return. Defensible valuations matter here, because the burden of proof sits with you rather than with the ATO.

Defer until you actually sell

Alternatively, you can choose to disregard the deemed disposal. This is known as the deferral election. The affected assets are then treated as remaining connected with Australia, so they stay within the Australian CGT net until you sell them or become an Australian resident again. The election is all or nothing across the non-TAP assets caught by the event, so you cannot pick and choose asset by asset.

The 1 July 2027 change that complicates the choice

From 1 July 2027, the 50% CGT discount for individuals, trusts, and partnerships is replaced by cost base indexation together with a minimum 30% tax on gains accruing after that date. A deferred gain is assessed when you actually sell, which for many people will fall after that point. A deemed disposal on departure is assessed under the rules applying now.

That turns what used to be largely a cash flow question into a question about which set of capital gains rules you end up under. The interaction is detailed and depends on when the gain accrues, so it is worth modelling carefully before making an election you cannot later reverse.

The Consequences People Miss

Your former home

Since 9 May 2017, foreign residents generally cannot claim the main residence exemption when selling an Australian home, unless a qualifying life event occurs within six years of becoming a foreign resident. Keeping the house and selling it a few years into your time overseas can therefore expose decades of capital growth to tax that would have been exempt had you sold before leaving.

The CGT discount shrinks

For residency periods after 8 May 2012, the 50% discount is apportioned according to the days you were an Australian resident across the total ownership period. Fewer resident days means a proportionally smaller discount. Someone who held an asset for eight years but was a resident for only three of them keeps part of the discount, not all of it.

Rates, thresholds, and double tax agreements

Foreign residents do not receive the tax-free threshold, so Australian-sourced income is taxed from the first dollar. Interest, royalties, and unfranked dividends usually have withholding tax applied instead, as a final tax. Australia also holds a double taxation agreement (DTA) with many countries, which may reduce double taxation or, in some cases, give your new country sole taxing rights over a later disposal. This varies considerably by country and cannot be assumed.

What to Get in Order Before You Go

The exit tax is rarely the expensive part. Missing records usually are. Before you leave, gather cost base evidence for every asset you hold, obtain market valuations dated to your cessation date wherever the value is not self-evident, and settle on your departure date for tax purposes.

Your departure-year return is a part-year return, covering a resident period and a foreign resident period, and it is more involved than a standard return. Having the underlying records organised beforehand makes it cheaper regardless of who prepares it. Our taxation services cover individual returns, capital gains reporting, and reconstructing records before they are needed.

For the residency determination itself, and for how a double taxation agreement applies in the country you are moving to, speak with a tax adviser who works in cross-border matters regularly. It is a specialised field, and the cost of an incorrect residency position is typically far higher than the fee for having it assessed properly.

Get Advice Before You Book the Flight

The exit tax is not a penalty for leaving Australia. It exists so that gains built up while you were a resident do not simply fall out of the Australian system the moment you board a plane. Handled early, it is a planning exercise with options attached. Handled late, it becomes a valuation problem and an amended return. The information above is general in nature and is not personal tax, financial, or credit advice; your own circumstances will determine what applies.

To have your records and your Australian tax position reviewed before you leave, contact The Calculators.