Do Australian Expats pay CGT on their investments back home?

For Australians living overseas, one of the most common and convoluted tax questions is:

"do Australian Expats pay CGT on their investments back home?"

Capital gains tax (CGT) can have a significant impact on long term wealth creation, particularly if you continue to hold Australian shares, managed funds, cryptocurrency or property while living abroad. Understanding how your investments are taxed once you leave Australia is critical. The rules are often misunderstood, and mistakes can be costly.

This blog explains how capital gains tax applies from an Australian perspective once you move overseas, which assets remain taxable, and the common traps Australian Expats should be aware of. Please note this blog does not cover the CGT implications that may apply in your host country.

What is Capital Gains Tax (CGT)?

Capital gains tax applies when you sell or dispose of an asset for more than its original purchase price. This can include shares, exchange-traded funds (ETFs), managed funds, investment property, cryptocurrency and business assets.

In Australia, capital gains tax is not a separate tax. It is included as part of your income tax assessment in the year the gain is realised and applied against your marginal tax rates. For Australian Expats, this could be between 30% and 47%.

This brings us back to the key question of do Australian Expats pay CGT on their investments? The answer depends largely on your tax residency status and the type of asset you own.

Tax residency and Australian Expats

Understanding the CGT on investments in Australia depends first on whether you’re classified as an Australian tax resident or a non-resident for tax purposes.

Australian tax residents are taxed on capital gains from assets held anywhere in the world. Non-residents are generally only taxed on gains from specific Australian-based assets, known as Taxable Australian Property (TAP).

Many long-term expats are considered non-residents for tax purposes. This can reduce exposure to Australian capital gains tax, but it does not eliminate it.

Which assets remain subject to CGT as a non-resident?

Once you are classified as a non-resident, Australian capital gains tax generally applies only to Taxable Australian Property (TAP).

Assets that are Taxable Australian Property (TAP) include:

• Australian real estate, such as houses, apartments and land

• Leases over Australian real property

• Certain indirect interests where the value is mainly derived from Australian real property, such as property-rich companies or trusts

• Assets connected to a permanent business establishment in Australia

Assets that are not Taxable Australian Property (non-TAP) and are generally not subject to Australian CGT for non-residents include:

• Shares in listed Australian companies

• Exchange-traded funds (ETFs) and managed funds

• Cryptocurrency

• Foreign investments

• Overseas property

For most expats, the question of Do Australian Expats pay CGT on their investments ultimately depends on whether the investment is directly or indirectly linked to Australian real property.

Loss of the 50% CGT Discount

A key issue for Australian Expats is the restricted availability of the 50% capital gains tax (CGT) discount. Generally, non-residents are not entitled to the discount for any period during which they were non-residents, even if the asset was held for more than 12 months. Limited exceptions apply where the asset was acquired before 8 May 2012. As a result, if you sell Australian property while living overseas, the full capital gain may be subject to tax.

The Main Residence Exemption Trap

The main residence exemption is one of the biggest pitfalls for Australian expats. In most cases, non-residents are unable to claim this exemption when selling their former home. This restriction can apply even if the property was your family home for many years, you only moved overseas temporarily, you rented it out while away, or you do not own another home.

As a result, selling a former home while living overseas can lead to a significantly higher capital gains tax bill than expected. This highlights why it’s crucial for expats to understand CGT rules before making any property decisions.

Capital Gains Tax when leaving Australia

When you cease Australian tax residency, you’ll need to consider the deemed disposal rules if you own non-TAP assets (e.g. shares). Under these rules, you can choose to treat certain assets as if they were sold at the time you became a non-resident, even though you still own them.

Electing for deemed disposal triggers capital gains tax on those assets; however, further growth on those assets will not accrue a CGT liability with the ATO in the future as a non-resident. Alternatively, you can choose not to elect for deemed disposal, deferring the CGT until the asset is actually sold in the future. Each option has different tax outcomes and cash flow implications.

The right choice depends on your broader tax strategy, expected investment growth and whether you plan to return to Australia.

Capital gains tax when returning to Australia

If you later return to Australia and become a tax resident again, your capital gains tax position may improve. You may regain partial access to the CGT discount from the date residency resumes, and longer holding periods may reduce future tax outcomes. For property owners, selling after returning to Australia can sometimes produce a more favourable result than selling while overseas.

Conclusion

Understanding this area of Do Australian Expats pay CGT on their investments back home is essential for protecting wealth and avoiding unnecessary tax. Capital gains tax rules for Australian Expats are complex, particularly around tax residency, property ownership and the loss of valuable exemptions.

Before selling assets or making major investment decisions while living overseas, professional advice from a Financial Adviser and Tax Accountant experienced in Expat taxation is critical. Strategic planning and correct timing can make a substantial difference to your long-term financial outcome.

Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.

If you would like to speak to one of our Expat Financial Advisers about this blog or if you have other queries, we would be more than happy to speak with you. Feel free to send us an enquiry through the ‘Contact Us’ tab provided in the link below:

Contact Us

General Advice Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.