The Departure-Year Tax Return: Identifying the Correct Residency Cessation Date

A departure-year return asks for the date on which Australian tax residency ceased. That date can determine the foreign income included, the part-year tax-free threshold, Medicare levy treatment and the timing of CGT event I1.

Selecting the departure date automatically is unsafe. The correct date follows from the residency tests and the person’s established living arrangements.

Build a dated transition chronology

Record the last day in the Australian home, departure and arrival dates, overseas accommodation commencement, family movement, employment start, visa activation, shipping of possessions, Australian property use and subsequent return trips.

The chronology should distinguish intention from implementation. A plan to live overseas is not the same as having established the relevant arrangement.

Transitional accommodation

Hotels, temporary corporate housing or staying with relatives do not automatically prevent cessation. The question is whether the whole pattern shows that the person has ceased residing in Australia and, under the domicile test, has a permanent place of abode outside Australia.

Conversely, a long lease overseas does not guarantee cessation if family, home and life remain centred in Australia.

Income before and after the date

An Australian resident generally includes worldwide income up to cessation. After that date, the person generally includes Australian-sourced income and gains from taxable Australian property, subject to treaty rules and special provisions.

Salary should be allocated by source and service period, not only payment date. Bonuses, leave, employee shares and deferred compensation can require separate analysis.

CGT event I1

On ceasing residency, CGT event I1 can apply to assets that are not taxable Australian property. The taxpayer can generally choose to disregard the event, with the consequence that the assets remain within the Australian CGT net until a later CGT event or renewed residency.

Valuations and cost-base records at the change date may be essential even where no cash transaction occurs.

Return visits

Later visits do not automatically invalidate cessation, but their frequency, duration, purpose and accommodation can illuminate whether the original departure was genuinely settled. The analysis should use facts known at the relevant time without ignoring later evidence.

Practical takeaway

Support the selected date with a concise residency memorandum and indexed evidence. A documented date is materially more defensible than a date entered only because it matches a boarding pass.

Official sources and further reading

• Australian Taxation Office: Living overseas and becoming a foreign tax resident
• Australian Taxation Office: TR 2023/1 – Income tax: residency tests for individuals
• Australian Taxation Office: Your tax residency
• Australian Taxation Office: How changing residency affects CGT
• Australian Taxation Office: Foreign and temporary residents

TAX RESIDENCY