When an Australian individual stops being a tax resident, CGT event I1 happens for each CGT asset they hold that is not "taxable Australian property". That triggers a deemed disposal at market value on the day residency ends — and a real CGT bill, even though nothing has actually been sold. You can elect under s104-165 to defer the gain by keeping the asset inside the Australian CGT net until it is actually disposed of. Get this decision right before you leave: it is one of the most expensive tax errors an expat can make.
What CGT event I1 is, and when it happens
CGT event I1 is one of the lesser-known but most consequential events in Australian capital gains tax. It is set out in section 104-160 of the Income Tax Assessment Act 1997. The trigger is straightforward: it happens "if you stop being an Australian resident".
For an individual, that is the day you cease to satisfy the residency tests in section 6 of ITAA 1936 — usually the day you depart Australia with the intention of living overseas indefinitely, or the day you take up a permanent role abroad that establishes a new home in another country. The day residency ends is a question of fact, and the ATO routinely revisits it on audit.
When CGT event I1 happens, every CGT asset you own that is not taxable Australian property is treated as if you had disposed of it for its market value on that day, and immediately reacquired it for the same amount. The capital gain (or loss) on that deemed disposal is included in your final Australian-resident income year.
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What is "taxable Australian property" — and why it matters
CGT event I1 does not apply to assets that are taxable Australian property (TAP). Those assets remain inside the Australian CGT net regardless of where you live, and are only taxed when you actually sell them. The categories of TAP are defined in section 855-15 of ITAA 1997:
- Taxable Australian real property — Land or buildings situated in Australia, and mining/quarrying/prospecting rights over Australian land. - Indirect Australian real property interests — Broadly, a 10%-or-more interest (the "non-portfolio interest test") in an entity whose underlying value is mainly Australian real property (the "principal asset test"). This is the rule that catches shares in private companies that own Australian land. - Business assets of an Australian permanent establishment — CGT assets used at any time in carrying on a business through a PE in Australia. - Options or rights over any of the above. - An interest treated as TAP by election under s104-165(3) — which is the deferral choice covered below.
Everything else — your listed-share portfolio, your unit trust holdings, your overseas property, your crypto, your private-company shares in entities that are not Australian land-rich — falls outside TAP. Those are the assets I1 sweeps up.
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The s104-165 election: defer the gain, keep the asset in the Australian CGT net
Section 104-165 of ITAA 1997 gives an individual two choices when CGT event I1 happens:
Option A — Pay the CGT now. The deemed disposal proceeds at market value, you calculate the capital gain or loss in your departure-year return, and you pay the resulting tax (potentially with the 50% CGT discount for assets held over 12 months while you were a resident — subject to the apportionment rules covered in the next section).
Option B — Make the election under s104-165(2). You disregard the I1 capital gain or loss by choosing to treat the asset as taxable Australian property until either you become an Australian resident again, or you actually dispose of the asset. While the election is in force, the asset stays in the Australian CGT net. When you eventually sell, ordinary CGT rules apply on the real disposal — including the foreign-resident CGT discount restrictions in Subdivision 115-B.
The election is made asset-by-asset. It is irrevocable for the asset it covers, and it is generally taken to have been made by the way you complete your final Australian-resident return: by not including the I1 gain in your assessable income, you are taken to have elected to disregard it for that asset.
For most Australians leaving with significant unrealised gains in listed shares, ETFs and crypto, the s104-165 election is the right answer — paying CGT on assets you have not actually sold is a cash-flow disaster. But the choice is not automatic. Sit down with a TPB-registered tax agent before lodging your final resident return.
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The CGT discount trap: why "I'll just sell after I leave" rarely works
Since 8 May 2012, the 50% CGT discount has been removed for foreign and temporary residents in respect of capital gains accrued after that date. The rules are in Subdivision 115-B of ITAA 1997 (see in particular sections 115-105 to 115-120, which deal with discount percentages for foreign and temporary residents).
The practical effect: if you elect to defer under s104-165 and then sell while a foreign resident, the 50% discount is apportioned. Broadly:
- The portion of the gain accrued while you were an Australian resident (up to either the date of the 2012 change or the date you ceased residency, depending on the asset) may still attract the discount. - The portion accrued while you were a foreign resident is taxed at full marginal rates with no discount.
For an asset held for many years and sold soon after departure, the discount restriction may still leave you better off than a deemed-disposal hit at departure. For an asset sold five or ten years later from overseas, the discount disappears against most of the gain. Run both numbers — pay-now vs defer-and-sell-later — for each significant holding before you make the election.
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Worked example: a typical departing-resident portfolio
Consider an individual leaving Australia on 30 June 2026 with the following CGT assets and no taxable Australian property:
- An ASX-listed share portfolio, cost base $200,000, market value $350,000. - An overseas (US) brokerage account, cost base AUD $120,000, market value AUD $180,000. - A crypto holding, cost base $40,000, market value $90,000. - 5% of a private Australian operating company (no real property) — cost base $50,000, market value $250,000.
CGT event I1 happens for all four assets on 30 June 2026 (none is taxable Australian property: the private company is not land-rich, and 5% does not pass the non-portfolio test in any event). The total unrealised gain is $460,000.
If the individual does nothing, the entire $460,000 gain is included in the 2025-26 return. Even with the resident-period CGT discount available on the resident portion of the gain, the tax bill is substantial — and payable from cash flow at the same time as relocation costs.
If the individual elects under s104-165, no CGT is payable in 2025-26. All four assets remain inside the Australian CGT net until they are sold. The trade-off is the discount apportionment for any future disposal while non-resident, and the ongoing record-keeping burden — but the cash-flow position at departure is dramatically better.
For our independent listings of Australian tax agents with expat experience, see accountants in Sydney and accountants in Melbourne.
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Practical issues your tax agent will work through
Date of ceasing residency. The "day" CGT event I1 happens is a question of fact, not just when you fly out. Domicile, permanent place of abode, the 183-day test and the Commonwealth superannuation test all feed into it.
Market values at departure. You need defensible valuations for every non-TAP asset at the date residency ends. For listed securities the closing price is fine. For private-company shares, options, unit trusts and unlisted holdings, get a written valuation.
Foreign tax credits and treaty relief. If you later sell a non-TAP asset that you have elected to keep in the Australian CGT net, and the country you live in also taxes the gain, you may need to use a tax treaty to allocate taxing rights. Most modern Australian treaties give residence-state taxing rights for non-real-property gains.
Returning to Australia. If you re-establish Australian residency, the elected assets keep their original cost base and the s104-165 election lapses. For assets you did not own when you previously left, see our companion guide on becoming an Australian tax resident and the s855-45 cost-base reset.
Interaction with Division 855 changes. If you also own Australian real property, see our article on selling Australian property as a foreign resident — that path has its own ruleset and a separate 15% withholding regime.
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FAQ
Q: I'm only going overseas for a two-year contract. Does CGT event I1 still apply? A: It depends on whether you cease Australian tax residency. A short overseas posting where you keep your Australian home, family and intention to return is often not enough to break residency. A genuine indefinite departure usually is. Get a written residency view from a registered tax agent before you leave — the answer drives everything else. Q: Does CGT event I1 apply to my superannuation? A: No. Your interest in an Australian complying super fund is not a CGT asset to which I1 applies in the ordinary sense — super is taxed under its own regime. CGT event I1 also does not apply to pre-CGT assets (those acquired before 20 September 1985) or to assets held on capital account that are otherwise outside the CGT regime. Q: Will my Australian tax agent automatically make the s104-165 election for me? A: Not necessarily. The election is generally implicit in how you complete your final resident return — by leaving the I1 gain out. But it is a decision with long-term consequences and should be made deliberately, asset by asset. Ask your tax agent to document the choice and rationale for each significant holding. Q: What if I'm a temporary resident on a visa, not a permanent resident or citizen? A: Temporary residents are largely exempt from Australian CGT on non-TAP assets in the first place under Subdivision 768-915. CGT event I1 still has limited application when temporary residency ends, but the practical impact is usually small for non-TAP holdings. Confirm your residency status (resident vs temporary resident vs foreign resident) with your tax agent — these are three different categories with three different CGT outcomes.---
Sources
- ATO — Changing residency status and CGT: ato.gov.au — your tax residency - ATO — CGT and foreign residents: ato.gov.au — foreign residents and CGT - ITAA 1997 s 104-160 (CGT event I1): austlii.edu.au — Income Tax Assessment Act 1997 - ITAA 1997 s 104-165 (election to defer): same Act, Subdivision 104-I - ITAA 1997 s 855-15 (taxable Australian property): same Act, Subdivision 855-A - ITAA 1997 Subdivision 115-B (foreign-resident CGT discount restrictions) - Tax Practitioners Board public register: tpb.gov.au/public-register
Information in this article is general and current as at 19 May 2026. Tax law changes; verify the position with a TPB-registered tax agent before you leave Australia.
Browse our independent directory of accountants and tax agents at /best/.