Guide

Deemed disposal: the tax bill for leaving itself

The day you stop being an Australian tax resident, the law pretends you sold most of your investments at market value, and taxes the pretend sale with real money. No sale, no proceeds, actual tax. Here is how CGT event I1 works, and why the escape hatch has teeth of its own.

What actually happens when you cease residency

Australia taxes residents on capital gains worldwide, but it can only reliably tax non-residents on assets physically or legally anchored here. So the moment your residency ends, the law squares the ledger: CGT event I1 deems you to have disposed of every asset that is not “taxable Australian property” at its market value on the day your residency ceased. Gains accrued to that day become assessable in your departure-year return, stacked on top of whatever else you earned that year.

This is not an anti-avoidance rule that only catches the aggressive. It is the default. It applies to the ordinary person with an index-fund portfolio who gets on a plane, whether or not they have heard of it.

What’s deemed, and what stays in the net

The dividing line is taxable Australian property (TAP). TAP is, broadly: Australian real property, interests of 10% or more in entities whose value is mostly Australian land, and assets used in a business you run through an Australian permanent establishment. TAP is not deemed sold, Australia keeps taxing it no matter where you live, so there is nothing to square up.

Everything else (non-TAP) is deemed. That means listed shares (Australian and foreign), ETFs and managed funds, crypto, most private company equity below the land-rich threshold, even foreign real estate. The portfolio you think of as “just sitting there” is precisely what the event targets. Assets acquired before 20 September 1985 are pre-CGT and outside the system entirely; everything after is in.

A worked example

Say you leave in the 2025, 26 year with a $400,000 share portfolio you bought three years ago for $250,000, and a departure-year salary of $150,000. The deemed disposal crystallises a $150,000 gain. You held the shares more than 12 months as a resident, so the 50% discount applies: $75,000 lands in your assessable income, taking you from $150,000 to $225,000.

On $150,000, a resident’s 2025, 26 tax plus Medicare levy is about $39,800. On $225,000 it is about $71,900, the extra $75,000 is taxed partly at 37% and mostly at 45%, plus the levy. The deemed disposal adds an estimated $32,050 to your departure-year bill. Your shares did not move. Your bank balance did not move. The tax is due anyway.

The deferral election, and its three teeth

You can elect to ignore the deemed disposal. Choose deferral and the assets are treated as taxable Australian property from your departure until you sell them or resume residency, no bill now. It sounds like the obvious move. It is often the expensive one, for three reasons.

First, the discount freezes. Since 8 May 2012, the 50% CGT discount does not accrue for periods of foreign residency. Hold a deferred asset for another eight years abroad and your discount percentage gets diluted toward nothing on the gain that keeps building.

Second, the whole gain stays Australian. Not just the gain to your departure date, the entire gain, whenever you eventually sell, taxed at non-resident rates: 30% from the first dollar, no tax-free threshold. The clean break the deemed disposal would have given you never happens.

Third, deferral captures growth that would otherwise have escaped. If you pay the exit bill, everything the asset earns after departure is outside Australian CGT entirely (assuming you stay non-resident and it stays non-TAP). Defer, and Australia taxes the post-departure growth too, growth it had no claim on. For an asset you expect to rise strongly, deferral can convert a one-off $32,000 problem into a much larger one, at worse rates, with a shrunken discount.

Deferral genuinely wins in some fact patterns, assets you expect to fall or tread water, a planned return to Australia before selling, or simply having no way to fund the bill. The point is that it is a modelling decision, not a default.

The cash problem

The hardest part of paying now is not the rate. It is that the “sale” produced no proceeds. In the example above you owe roughly $32,000 with nothing sold. Your options are all imperfect: sell some assets before departure (which triggers the same tax, but at least produces cash), sell just after (real sale at roughly the deemed value, cash in hand, effectively the same bill), fund it from savings, or defer and accept the teeth above. What you cannot do is nothing, the assessment arrives whether or not you planned for it.

What most people miss

• Timing moves the bill between financial years. Leaving on 25 June versus 5 July decides which year’s income the gain stacks on, a low-income departure year can be worth tens of thousands.
• Crypto is non-TAP. The entire stack is deemed sold at departure, parcel by parcel, discount only where the parcel was held over 12 months.
• Employee share scheme interests can behave differently, deferred-taxing-point ESS has its own cessation rules and needs separate modelling before you rely on any of the above.
• Losses count too: deemed disposals of losing positions offset deemed gains in the same year.

General information only, not tax, legal or financial advice, and no tax agent services are provided. Verify your position with a registered tax agent before acting. Rates and rules last verified: 23 July 2026.