Understanding Deemed Acquisition vs Deemed Disposal for Australian Expats
- Mitchell Kelsey
- 17 hours ago
- 5 min read
If you’re an Australian Expat living abroad, tax residency is one of the most important and often misunderstood aspects of your financial life. Two concepts relating to tax residency that frequently cause confusion are deemed disposal and deemed acquisition. While they sound similar, they apply at different times and can have very different tax outcomes.
In this blog, we’ll break down Deemed Acquisition vs Deemed Disposal for Australian Expats, explain when each applies, and highlight why getting this right is critical to avoiding unexpected tax bills and preserving long-term wealth.
Why Tax Residency Matters for Australian Expats
Australia taxes residents and non-residents very differently. When you become (or cease to be) an Australian tax resident, the Australian Taxation Office (ATO) may treat certain assets as if they were sold or acquired, even though no actual transaction has taken place.
This is where Deemed Acquisition vs Deemed Disposal for Australian Expats becomes particularly relevant. These rules are designed to ensure Australia taxes gains that accrue while you are a resident, and does not tax gains that accrue while you are a non-resident (subject to some key exceptions).
What Is Deemed Disposal?
Deemed disposal generally occurs when you cease to be an Australian tax resident.
When this happens, the ATO may treat you as if you sold certain assets at their market value on the day before you became a non-resident. This can trigger capital gains tax (CGT), even though you haven’t actually sold anything.
Assets Typically Affected by Deemed Disposal
Deemed disposal applies to:
Shares and Exchange-Traded Funds (ETFs)
Managed funds
Listed and unlisted investments
Cryptocurrencies
Assets Typically Excluded for Deemed Disposal
Some assets are not subject to deemed disposal, including:
Australian real property (e.g. residential or commercial property)
Assets used in an Australian permanent establishment
Certain employee share schemes (depending on structure)
The Voluntary Nature of Deemed Disposal
Deemed disposal applies when you cease to be an Australian tax resident, but importantly, it is voluntary. When you leave Australia and become a non-resident for tax purposes, you generally have two options:
Elect to trigger deemed disposal, or
Choose not to make the election, meaning deemed disposal does not occur at that time.
If you do not make the election:
No CGT is payable when you leave Australia
Australia retains taxing rights over those assets
CGT is deferred until you actually sell the asset
Example: Deemed Disposal in Action
Sarah moves from Australia to Singapore and becomes a non-resident for tax purposes. She owns an Australian share portfolio that she originally purchased for $200,000, and that is now worth $350,000.
Under the deemed disposal rules, Sarah is treated as having sold the shares for $350,000 on the day before she ceased Australian tax residency. This results in a capital gain of $150,000, which may be taxable in Australia.
Any capital gains that arise after Sarah becomes a non-resident are generally not subject to Australian capital gains tax while she is living overseas. When Sarah later resumes Australian tax residency, the deemed acquisition rules apply (discussed next).
What Is Deemed Acquisition?
Deemed acquisition generally applies when you become an Australian tax resident after a period of non-residency.
In this case, the ATO may treat you as if you acquired certain assets at their market value on the date you became a resident. This effectively “resets” the cost base for Australian CGT purposes.
Why Deemed Acquisition Exists
The purpose of deemed acquisition is to ensure Australia only taxes gains that accrue while you are an Australian tax resident, not gains that occurred while you were living overseas.
Assets Commonly Subject to Deemed Acquisition:
Shares and Exchange-Traded Funds (ETFs)
Managed funds
Foreign investment portfolios
Crypto assets held while non-resident
Example: Deemed Acquisition in Action
Sarah has lived in Singapore for 5 years. When she returned to Australia and became a tax resident again, her share portfolio was valued at $500,000. The portfolio of shares is deemed to be acquired at their market value on the date she resumes Australian tax residency (i.e. $500,000).
If Sarah later sells those assets, Australia generally only taxes gains from the date of her return onward.
This is the other side of Deemed Acquisition vs Deemed Disposal for Australian Expats, and it can work in your favour if planned correctly.
Key Differences: Deemed Acquisition vs Deemed Disposal for Australian Expats
While both concepts relate to changes in tax residency, their impact is very different.
Timing
Deemed disposal occurs when you cease Australian tax residency.
Deemed acquisition occurs when you become an Australian tax resident.
Tax Impact
Deemed disposal can trigger an immediate CGT liability.
Deemed acquisition usually does not trigger tax upfront, but affects future CGT calculations.
Cost Base Treatment
Deemed disposal locks in gains (or losses) up to the date of departure.
Deemed acquisition resets the cost base to market value at the date of arrival.
Understanding these differences is essential when navigating Deemed Acquisition vs Deemed Disposal for Australian Expats, especially if you move countries multiple times.
Strategic Planning Opportunities for Expats
With proper advice, both deemed disposal and deemed acquisition can be managed strategically.
Before Leaving Australia
Review your investment portfolio before ceasing residency
Consider realising capital losses to offset deemed gains
Evaluate whether electing to defer deemed disposal (where available) makes sense
Before Returning to Australia
Understand which assets will receive a new cost base
Review overseas structures and investments
Ensure accurate market valuations on the date residency resumes
Failing to plan can lead to unnecessary tax, while proactive advice can significantly improve outcomes in Deemed Acquisition vs Deemed Disposal for Australian Expats.
Common Mistakes Australian Expats Make
Some of the most frequent issues we see include:
Assuming tax residency is determined solely by visa status
Forgetting to obtain asset valuations at the correct dates
Not realising that deemed disposal can apply
Overlooking how foreign tax systems interact with Australian CGT rules
These mistakes often surface years later, usually when an asset is sold, making them harder and more expensive to fix.
Conclusion
Deemed Acquisition vs Deemed Disposal for Australian Expats is a complex area of financial planning for Australian Expats with shares and other assets covered under the rules. These rules can significantly impact your tax position, cash flow, and long-term investment outcomes.
Whether you’re preparing to leave Australia, already living overseas, or planning a return, understanding how deemed acquisition and deemed disposal apply to your situation is critical. With the right advice, you can avoid surprises, stay compliant, and make smarter decisions across borders.
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:
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.