How are Australian Expats Taxed on Shares while Living Overseas

As a Financial Adviser who specialises in helping Australian Expats, a common question we receive is: how are Australian Expats taxed on shares while living overseas?

Whether you hold Australian shares, international shares, or ETFs through a local or offshore broker, understanding the tax implications while you live abroad is critical for staying compliant and avoiding unnecessary tax liabilities.

This blog explores the key capital gains tax (CGT) implications for Australian Expats holding shares, including how they are treated upon moving overseas, during your time overseas, and what happens when returning to Australia. It also explains how the 50% capital gains tax discount applies for Australian Expats.

Tax Residency Is Important

Firstly, it’s important to understand that the tax treatment of yours shares hinges on your tax residency status in Australia. Once you’re considered a non-resident for tax purposes, your tax obligations to Australia change significantly.

Non-residents are generally only taxed on Australian-sourced income and certain assets classified as taxable Australian property (TAP). This includes real estate and certain business interests, but typically does not include shares, unless those shares are tied to Australian real estate assets.

Deemed Disposal When Leaving Australia

When you move overseas and become a non-resident, the Australian Taxation Office (ATO) may treat you as having sold all your shares, at their market value on the date you cease tax residency. This is known as a deemed disposal. However, this is optional, with two avenues available:

1. Pay Capital Gains Tax (CGT) on any unrealised gains in the tax year you depart Australia; or

2. Defer the capital gain until you actually sell the shares.

While deferring the capital gain sounds attractive, it comes with future tax complications. If you defer and later sell the shares while overseas, Australia still has the right to tax the capital gain, even though you're no longer a resident. Additionally, foreign resident tax rates starting from 30% will apply if you later decide to sell the shares while living overseas.

On the other hand, if you choose to incur the capital gains tax upon departing, you will not be subject to Australian taxes on future capital growth of your shares.

Shares Bought and Sold Overseas

Once you become a non-resident for Australian tax, Australia typically does not tax capital gains on shares, including those from overseas shares. This means that if you buy and sell shares through an Australian broker while living overseas, Australia generally will not tax those gains.

However, your new country of residence may tax those gains under its own rules. So while Australia does not have taxing rights for several investments, you may still be subject to tax regulations in your country of residence.

No 50% Capital Gains Discount for Non-Residents

Normally, Australian residents can claim a 50% discount on capital gains for assets held longer than 12 months. However, non-residents are not eligible for this discount on gains accrued after 8 May 2012.

Here's how it works:

If you acquired shares while you were an Australian tax resident and held them for more than 12 months, you may be able to apply the 50% CGT discount to the portion of the gain that accrued while you were a resident. However, the portion of the gain that accrued while you were a non-resident does not qualify for the discount.

If you acquired the shares after becoming a non-resident, the entire gain is ineligible for the 50% discount.

This distinction is critical. Many expats mistakenly assume that just holding the asset for over a year qualifies them for the discount, but your tax residency during the holding period is what really matters.

Deemed Acquisition When You Return

If you acquired shares while living overseas, and then return and become a tax resident again, you’ll face a deemed acquisition event. The ATO treats you as having reacquired your shares at their market value on the date you became a resident again. This resets the cost base for CGT purposes going forward.

For any gains made since your return to Australia, remember that the 12-month holding period required to qualify for the 50% CGT discount begins from the date you arrived back in the country, not from when the shares were originally purchased.

What About Dividends?

If you're a non-resident holding Australian shares, your dividends are subject to withholding taxes in Australia.

Fully franked dividends are not subject to withholding tax and are generally tax-free for non-residents. On the other hand, unfranked dividends are subject to withholding tax, usually at a rate of 15 to 30 percent, depending on the tax treaty between Australia and your country of residence.

You typically won’t need to lodge a tax return in Australia for these dividends unless you have other Australian income.

Conclusion

The question how are Australian expats taxed on shares while living overseas is not as simple as it might seem. Tax residency, the type of shares you hold, the timing of your purchases and sales, and your intentions to return to Australia all influence how your investments are taxed.

If you’re buying or selling shares while overseas, or planning to move back to Australia, getting professional advice is critical. Missteps can lead to unnecessary tax bills, double taxation, or missed opportunities to minimise your tax exposure.

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.