When you become an Australian tax resident, section 855-45 of ITAA 1997 deems you to have acquired each of your non-Australian-property CGT assets at their market value on the day residency starts. The asset's cost base "resets" — only the gain after that day is taxable in Australia. This rule applies to returning expats, new migrants and permanent-resident-visa arrivals (once they stop being temporary residents). Get the date right, get the valuations right, and document them at the time. A reset cost base done well can save tens of thousands of dollars on a future disposal.
What section 855-45 actually does
Section 855-45 of the Income Tax Assessment Act 1997 is the mirror image of CGT event I1. Where I1 captures the latent gain on departure for an Australian-resident leaving, s855-45 ensures that an Australian resident arriving is not taxed in Australia on gains that accrued before they were ever an Australian resident.
The rule is straightforward in concept. When an individual becomes an Australian tax resident, for each CGT asset they own that is not "taxable Australian property" (TAP) and that is not already covered by another provision (such as trading stock):
- The asset is treated as if it was acquired at the time the individual became an Australian resident. - The acquisition cost base is its market value at that time.
Future disposal is then taxed in Australia under ordinary CGT rules, with the cost base set to that market value. Pre-residency growth is outside the Australian net; post-residency growth is taxed in Australia.
The categories of "taxable Australian property" in s855-15 — Australian real property, indirect interests in Australian real property, business assets of an Australian permanent establishment, and options or rights over those — are not reset. They were always within the Australian CGT net and remain so. Section 855-45 specifically targets the rest of an individual's portfolio: foreign-listed shares, foreign managed funds, foreign property, crypto, private company holdings in non-land-rich entities and so on.
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When residency actually starts — the date that drives everything
Tax residency in Australia is decided under section 6(1) of ITAA 1936, applying four tests:
- The resides test — ordinary meaning of "resides", considering physical presence, intention, family, business, social and living arrangements. - The domicile and permanent place of abode test — domicile in Australia unless the Commissioner is satisfied of a permanent place of abode outside Australia. - The 183-day test — physical presence in Australia for more than half the income year, unless usual place of abode is outside and there is no intention to take up residence. - The Commonwealth superannuation test — narrowly applicable to certain government employees.
An individual is an Australian tax resident if they satisfy any one of these tests. The framework is set out in ATO ruling TR 98/17 and updated guidance pages.
The date matters because s855-45 attaches to the day residency starts. For a returning expat with a portfolio in motion, the timing of contracts, account transfers and even the day they cross the border can affect which side of the line a particular gain falls on.
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The temporary resident exclusion — and why it matters for many migrants
Subdivision 768-915 of ITAA 1997 carves out a separate category of Australian tax resident: the temporary resident. To be a temporary resident, broadly:
- The individual must hold a temporary visa under the Migration Act 1958; - The individual and their spouse must not be Australian residents within the meaning of the Social Security Act 1991 (which is a different and narrower test).
Temporary residents are largely exempt from Australian CGT on their non-TAP assets, and from Australian tax on most foreign-source income other than employment income earned in Australia. As a consequence:
- The s855-45 cost-base reset does not happen on becoming a temporary resident. - The reset happens later, when the individual ceases to be a temporary resident — typically when they become a permanent resident or Australian citizen, or otherwise cease to satisfy the temporary resident conditions.
For a 482 visa holder who later transitions to permanent residency, the reset day is the day they stop being a temporary resident — not the day they first arrived in Australia. The market value of their foreign assets at that day is the new cost base.
This is one of the most commonly missed points in expat tax planning. A new migrant on a 482 visa for several years before transitioning to a PR visa has held foreign assets through a substantial period of value change. The day they switch from temporary resident to ordinary resident is the date the latent gain on those foreign assets is locked out of the Australian CGT net.
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What "market value" means in practice
Market value for s855-45 follows the ordinary tax meaning: the price the asset would fetch in a hypothetical arm's-length sale between a willing-but-not-anxious buyer and seller, both fully informed. The ATO's market value guidance for tax purposes (notably the Market valuation for tax purposes guide) sets out evidentiary standards.
Listed securities. Closing price on the relevant exchange on the day residency starts (or the prior trading day if the residency date is a weekend or local holiday). Convert to AUD using the RBA daily reference rate or the ATO foreign exchange rates schedule. Keep a screenshot or contemporaneous broker statement.
Foreign managed funds and unit trusts. Unit price published by the issuer at or nearest to the residency date. Some funds price weekly or monthly — use the closest published price and document it.
Foreign property. Written valuation from a qualified local valuer prepared at or near the residency date. A retrospective valuation prepared years later is acceptable in principle but carries weaker evidentiary weight; contemporaneous valuations stand up to ATO scrutiny far better.
Private-company shares and unlisted equity. Independent valuation by a qualified valuer applying generally accepted valuation methods (DCF, comparable transactions, net asset value depending on the entity). Tax-effected only if there is a clear basis. Document assumptions in writing.
Crypto. AUD market value at the residency date using a credible price source (e.g. the relevant exchange where you held the asset, or a recognised aggregator). Capture the AUD-equivalent value for each holding.
Stock options, RSUs, vested and unvested equity. Treatment depends on the specific instrument. Vested shares are reset under s855-45. Unvested equity may not even be a CGT asset yet for the recipient and follows the rules in Division 83A for employee share schemes. Get advice on each instrument separately.
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Worked example: a returning expat with a US portfolio
An Australian who left in 2014 (becoming a foreign resident at that date) returns permanently to Sydney on 1 July 2026. They hold:
- A US brokerage portfolio (S&P 500 ETF, Apple, Microsoft, several other stocks), original cost USD $120,000, market value on 1 July 2026 USD $480,000. - A condo in Florida, original cost USD $250,000, market value on 1 July 2026 USD $420,000. - 4 BTC, acquired between 2019 and 2021 at an average cost of USD $30,000 per coin, market value on 1 July 2026 USD $80,000 per coin.
On 1 July 2026 they become an Australian tax resident under the resides test. They are not a temporary resident — they are a returning Australian citizen.
Section 855-45 deems each asset to be acquired on 1 July 2026 at its market value on that day, converted to AUD using the daily rate. Cost bases for future Australian CGT are therefore:
- US brokerage portfolio — AUD equivalent of USD $480,000 on 1 July 2026. - Florida condo — AUD equivalent of USD $420,000 on 1 July 2026. - 4 BTC — AUD equivalent of USD $320,000 on 1 July 2026.
If the Florida condo is later sold for USD $500,000, only the gain on USD $80,000 (the rise above the residency-date market value, in AUD) is taxed in Australia. The growth from USD $250,000 to USD $420,000 — accrued while non-resident — is outside the Australian net. Without the s855-45 reset, the entire growth from $250,000 to $500,000 would have been taxable on disposal.
For this taxpayer, the right action on 1 July 2026 is to obtain a US-based valuation of the condo, screenshot the brokerage holdings with closing prices, and capture the AUD-equivalent crypto values. Without that contemporaneous record, the ATO is entitled to challenge cost-base claims on a later disposal.
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Interaction with foreign tax credits and tax treaties
A future disposal of a non-TAP asset by an Australian-resident may also be taxed in the source country. Two mechanisms manage the double taxation:
Foreign income tax offsets in Division 770 ITAA 1997 — Australia provides a credit for foreign tax paid on foreign-source income, capped at the amount of Australian tax payable on the same income.
Tax treaties — Most Australian double tax treaties give the source country a taxing right over real property gains in that country, and the residence country a taxing right over most other gains. The interaction can shift the result.
For US assets in particular, the Australia–US tax treaty is important. The treaty generally taxes US real property in the US and most other gains in the residence country (Australia). Get specific advice when the destination country also taxes the gain on disposal.
For our companion guides on the other side of the transaction, see CGT event I1 on leaving Australia and selling Australian property as a foreign resident. To find a tax agent experienced with returning expats and migrants, browse accountants in Sydney, Melbourne and Brisbane.
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Practical checklist for the day residency starts
- Confirm the residency date in writing with a TPB-registered tax agent. Bank account openings, lease starts, school enrolments, family arrival and intention are all evidence — keep them. - Take a portfolio snapshot on the residency date. Screenshots, broker statements, exchange exports, valuation engagement letters. - Get formal valuations for foreign property, private-company shares and any other unlisted holding. Do not wait until disposal. - Convert to AUD using the right rate. The RBA's daily reference rates or the ATO's foreign exchange rates schedule. Document which rate you used. - If transitioning from temporary resident to ordinary resident, capture market values on the day you cease being a temporary resident — not the day you arrived in Australia. - Keep the documentation indefinitely. The reset cost base may not be relevant for many years, but you will need to defend it when you eventually sell.
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FAQ
Q: I'm moving to Australia on a 482 visa. Do I get a cost-base reset on day one? A: Not under s855-45. You are likely a temporary resident under Subdivision 768-915 and your non-TAP foreign assets are largely outside the Australian CGT net for now. The reset happens when you cease to be a temporary resident (typically on grant of permanent residency). Capture values on that day. Q: What if I never sell the foreign assets — is the s855-45 reset relevant? A: It is relevant the moment you sell. CGT is event-based — the reset cost base is what determines your taxable gain on whatever disposal occurs years later. If you also leave Australia again, CGT event I1 will use the post-reset cost base for the deemed disposal at that future departure date. Q: I forgot to get valuations when I became a resident. What can I do now? A: You can obtain retrospective valuations at any time before disposal, but contemporaneous valuations carry far stronger evidentiary weight. For listed securities and crypto, you can usually reconstruct from public price history. For property and private equity, get a written retrospective valuation from a qualified valuer and document the methodology. Q: Does the reset apply to my superannuation in another country? A: Foreign superannuation is its own world. Section 305-70 of ITAA 1997 deals with transfers from foreign super to Australian funds, and the "applicable fund earnings" calculation taxes growth in the foreign fund accrued after the individual became an Australian resident. This is different from the s855-45 reset and has separate (and much more complex) rules. Get specific advice before transferring. Q: I'm an Australian citizen but have always lived overseas. Does the s855-45 reset apply when I first move to Australia? A: Yes. Section 855-45 applies on becoming an Australian tax resident, regardless of citizenship. The ATO's residency tests look at factual residency, not nationality. Your citizenship is not the trigger — your residency is.---
Sources
- ATO — Coming to Australia: ato.gov.au — coming to Australia - ATO — Foreign residents and CGT (includes s855-45 guidance): ato.gov.au — foreign residents and CGT - ATO — Market valuation for tax purposes: ato.gov.au — market valuation for tax purposes - ATO — Temporary residents and CGT: ato.gov.au — temporary residents and CGT - ITAA 1997 s 855-45 — cost base of CGT assets on becoming an Australian resident - ITAA 1997 Subdivision 768-915 — temporary residents - ITAA 1997 Division 770 — foreign income tax offsets - ITAA 1936 s 6(1) — definition of resident; TR 98/17 — residency of individuals - Reserve Bank of Australia — daily reference rates: rba.gov.au — exchange rates - Tax Practitioners Board public register: tpb.gov.au/public-register
Information in this article is general and current as at 19 May 2026. Residency-change tax outcomes are fact-specific; obtain personal advice from a TPB-registered tax agent for your circumstances.
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