Private ruling: Residency - Employee Share Scheme
Date of advice: 7 May 2026
Published: 20 July 2026
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: DD MM 20XX

Ruling: Q1: Will the Taxpayer cease to be a tax resident of Australia following their permanent relocation to Country A on DD MM 20XX? | A1: Yes. | Q2: Will any capital gain (or loss) made by the Taxpayer from the disposal of shares in Company A acquired under a qualifying 'Start-up' Employee Share Scheme be disregarded where the Taxpayer is a non-resident at the time of the disposal of the shares? | A2: Yes.

Relevant facts and circumstances: 1. The Taxpayer was born in Country B. 2. The Taxpayer's immediate family reside in Country B and the Taxpayer typically visits them once per year. The Taxpayer maintains a local digital bank account solely for incident expenses during visits. The Taxpayer has no real estate, investments or any other financial of professional connections in Country B. 3. The Taxpayer is an Australian citizen; they therefore are not required to obtain a Country A visa to reside and work in Country A on a permanent basis. 4. The Taxpayer resided in and was a tax resident of Australia before DD MM 20XX. 5. The Taxpayer scheduled their and their partner's departure from Australia on DD MM 20XX. 6. The Taxpayer's partner is a citizen of Country C, currently holding a X Visa. The partner applied for Permanent Residency in Australia in MM 20XX. 7. The Taxpayer and their partner relocated from Australia to Country A permanently on DD MM 20XX for a period of at least 4 years, and this is likely to be longer. 8. The Taxpayer does not have any dependents. 9. The Taxpayer ceased employment with Company A in Australia on DD MM 20XX. 10. After relocating to Country A, the Taxpayer will lease their Australian property and will not have any accommodation available to themselves in Australia. 11. The Taxpayer currently owns the following assets in their personal name: • List of assets provided 12. The Taxpayer will notify their Australian banks that they will be a non-resident of Australia on their relocation to Country A. 13. The Taxpayer will advise the Australian Electoral Roll that they are a non-resident of Australia. 14. The Taxpayer will inform Medicare that they will be residing overseas and cancel their Australian Private Health Insurance. 15. The Taxpayer does not have any membership of social and sporting clubs in Australia. 16. The Taxpayer is not eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS). 17. The Taxpayer's domicile remains in Australia. Your circumstances in Country A: 18. The Taxpayer has relocated to Country A with their partner. 19. After relocating to Country A, the Taxpayer intends to start a company in Country A to carry out consulting services from Country A and also do some volunteer work in Country A. 20. The Taxpayer's personal belongings will be shipped to Country A. 21. The Taxpayer currently owns a property in Country A which is leased to a third-party. Upon their relocation to Country A, this property will become the main residence of the Taxpayer and their partner, and they will reside in the property on a permanent basis. 22. The Taxpayer currently owns the following assets in their personal name: • List of assets provided 23. The Taxpayer will purchase a vehicle in Country A and obtain a Country A driving licence. 24. The Taxpayer will be a tax resident of Country A following their relocation and be subject to the domestic tax laws of Country A. The Taxpayer will be paying income tax in Country A. Your return to Australia: 25. The Taxpayer has relocated to Country A on a permanent basis and does not intend to return to Australia to reside. 26. Following the Taxpayer's relocation from Australia, the Taxpayer intends to spend about 28 days every year in Australia to visit friends and family. Option Plan: 27. The Taxpayer was employed by Company A. 28. In respect of the Taxpayer's employment with Company A, the Taxpayer participated in the 20XX Company A Employee Option Plan. Company A has advised the Taxpayer in their offer letters that the Employee Share Options granted to them qualify for the 'Start-Up' Employee Share Scheme Concession under Section 83A-33 of the ITAA 1997 (Company A Start-Up ESOP). Start-Up offer letters provided. 29. The Taxpayer was granted X Company A Options on DD MM 20XX under the Company A Start-Up ESOP Plan. All options under the Start UP ESOP are now fully vested but unexercised. The remaining unexercised Start-Up Options held by the Taxpayer are X. The exercise price in respect of the options is $X. 30. The Taxpayer intends to exercise the Options and sell the shares under the Company A Start-Up ESOP while they are a non-resident of Australia for tax purposes.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 104-160 | Income Tax Assessment Act 1997 section 104-165 | Income Tax Assessment Act 1997 section 134-1 | Income Tax Assessment Act 1997 section 855-10 | Income Tax Assessment Act 1997 section 855-15 | Income Tax Assessment Act 1997 section 995-1 Issue 1 | Residency | Question 1 | Will the Taxpayer cease to be a tax resident of Australia following their permanent relocation to Country A on DD MM 20XX? | Summary | Yes | Detailed reasoning: | 31. Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). | 32. The terms 'resident' and 'resident of Australia', as applied to an individual, are defined in subsection 6(1) of the ITAA 1936. | 33. The definition offers 4 tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are: | • the resides test (also referred to as the ordinary concepts test) | • the domicile test | • the 183-day test and | • the Commonwealth superannuation fund test. | 34. The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides in Australia according to the ordinary meaning of the word 'resides'. | 35. Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test). | 36. Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals. | 37. If you are a resident under the ordinary concepts test, domicile test or 183-day test, and only spend part of the income year in Australia, you are not necessarily a resident for the entire income year. The commencement and cessation of residency depend on your facts and circumstances. | 38. We have considered the statutory tests listed above in relation to your situation as follows: | The resides test | 39. The ordinary meaning of the word 'reside' has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place': See Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at 222, citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'. | 40. The observations contained in the case of Hafza v Director-General of Social Security (1985) 6 FCR 444 are also important: | Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place - even involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248; and Keil v Keil [1947] VLR 383 - a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place - Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 - together with an intention to return to that place and an attitude that that place remains "home": see Norman v Norman (No 3) (1969) 16 FLR 231 at 235... [W]here the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as "home", a change of intention may be decisive of the question whether residence in a particular place has been maintained. | 41. The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test: | • period of physical presence in Australia | • intention or purpose of presence | • behaviour while in Australia | • family and business/employment ties | • maintenance and location of assets and | • social and living arrangements. | 42. It is important to note that no one single factor is decisive, and the weight given to each factor depends on each individual's circumstances. | 43. Because the resides test is about whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia. The ordinary meaning of reside does not require an individual to have a principle or usual place of residence in Australia. | Application to your circumstances: | 44. The Taxpayer is not a resident of Australia under the resides test from DD MM 20XX based on the following facts. | 45. The Taxpayer and their partner departed to Country A on DD MM 20XX, the Taxpayer resigned from their employment, they will lease their Australian residential property out, dissolve their Australian Family trust, cancel their private health insurance, remove themself from the electoral role and notify their Australian banks that they are a non-resident. Additionally, they have made their former rental property in Country A their primary residence, they will transfer cash to their Country A bank account for living and investment purposes, will purchase a vehicle in Country A and will obtain a Country A drivers licence. These factors demonstrates behaviour consistent with an intention and purpose to reside outside of Australia from DD MM 20XX. | 46. The Taxpayer's intention to remain in Country A for the foreseeable future is evidenced by their intention to establish a company in Country A to undertake consultancy work in Country A, and to undertake volunteer work in addition. | 47. After the Taxpayer's departure they only intend to spend about 28 days every year in Australia to visit friends and family. | 48. The behaviour and intention described above combined with the Taxpayer's limited future physical presence in Australia after their departure indicates that they will cease to be an Australia resident from DD MM 20XX. | Domicile Test | 49. Whether your domicile is in Australia is determined by the Domicile Act 1982 and the common law rules on domicile. | 50. Your domicile is your domicile of origin (usually the domicile of your father at the time of your birth) unless you have a domicile of dependence or have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and hold the positive intention to make that country your home indefinitely. Your domicile continues until you acquire a different domicile. Whether your domicile has changed depends on an objective consideration of all relevant facts. | Application to your circumstances: | 51. The Taxpayer has provided that their domicile is in Australia. | Permanent place of abode | 52. If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined in light of all the facts and circumstances of each case. | 53. 'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory. | 54. The phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. It does not extend to more than one country, or a region of the world. | 55. The Full Federal Court in Harding v Commissioner of Taxation [2019] FCAFC 29 held at paragraphs 36 and 40 that key considerations in determining whether a taxpayer has their permanent place of abode outside Australia are: | • whether the taxpayer has definitely abandoned, in a permanent way, living in Australia and | • whether the taxpayer is living in a town, city, region or country in a permanent way. | 56. The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia: | • the intended and actual length of the taxpayer's stay in the overseas country | • whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time | • whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia | • whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence | • the duration and continuity of the taxpayer's presence in the overseas country and | • the durability of association that the person has with a particular place in Australia, i.e. maintaining assets in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. | 57. As with the factors under the resides test, no one single factor is decisive, and the weight given to each factor depends on the individual circumstances. | Application to your circumstances: | 58. The Taxpayer's permanent place of abode will be outside Australia from DD MM 20XX for the following reasons: | • the Taxpayer's intention is to remain in Country A for at least 4 years | • the Taxpayer is permitted to reside and work in Country A indefinitely | • the Taxpayer will lease their Australian residential property and will not have any accommodation available to themself in Australia | • the Taxpayer will ship their personal belongings to Country A | • the Taxpayer plans to sell their Australian Motor Vehicle before their departure | • the Taxpayer will inform Medicare of their overseas relocation | • the Taxpayer will cancel their private health insurance | • the Taxpayer plans to dissolve their Australian Family trust and | • the Taxpayer has a bank account in Country A which they will transfer money to from their Australian bank account for living expenses and investing. | 59. All of these factors indicate that after their departure on DD MM 20XX they will have abandoned their residency in Australia and commenced living permanently in Country A by setting up a new permanent place of abode from DD MM 20XX. | 183-day Test | 60. Where a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that both: | • the person's usual place of abode is outside Australia, and | • the person does not intend to take up residence in Australia. | 61. Ordinarily, persons ceasing residency in Australia will satisfy the prescribed exception to the 183-day test. The provided exception has 2 conditions. The person must have: | • an usual place of abode outside of Australia, and | • an intention not to reside in Australia. | Application to your circumstances: | 62. The Taxpayer will have been present in Australia from DD MM 20XX to the DD MM 20XX, exceeding 183 days in Australia. | 63. However, as discussed in paragraphs 58 and 59 their usual place of abode post their departure will not be Australia. Further, they do not intend to reside in Australia post their DD MM 20XX departure date. | 64. As such, under subsection 18(1)(a) of the Income Tax Rates Act (1986) they will only be a part-year resident for the 20XX income year until the DD MM 20XX. From the DD MM 20XX they will no longer be an Australian resident. | Issue 2 | Capital Gains Tax and Employee Share Scheme (ESS) | Question 2 | Will any capital gain (or loss) made by the Taxpayer from the disposal of shares in Company A acquired under a qualifying 'Start-up' Employee Share Scheme be disregarded where the Taxpayer is a non-resident at the time of the disposal of the shares? | Summary | Yes | Detailed reasoning: | ESS interests | 65. Generally, Division 83A applies where an employee ESS interest under an ESS at a discount under section 83A-20 of the ITAA 1997. | 66. The default position under Division 83A of the ITAA 1997 is that an employee who acquires an ESS interest is taxed upfront on any discount to market value of the ESS interest under subsection 83A-20(1) of the ITAA 1997. Under a taxed upfront ESS, the discount is included in the taxpayer's assessable income in the income year in which the ESS interest is acquired under subsection 83A-25(1) of the ITAA 1997. | 67. However, the ESS start-up concession within section 83A-33 provides for an employee to exclude a discount on ESS interests acquired from their assessable income. | CGT event I1 | 68. Section 104-160 of the ITAA 1997 provides: | (1) CGT event I1 happens if you stop being an Australian resident. | (2) The time of the event is when you stop being one. | 69. The Taxpayer ceased being an Australian resident on DD MM 20XX. Subsection 104-160(2) of the ITAA 1997 provides that CGT event I1 occurred at this time. | 70. Section 104-165 of the ITAA 1997 provides: | (1) If you are an individual, you can choose to disregard making a capital gain or a capital loss from all CGT assets covered by CGT event I1. | (2) If you do so choose, each of those assets is taken to be taxable Australian property until the earlier of: | a) a CGT event happening in relation to the asset, if the CGT event involves you ceasing to own the asset; | b) you again becoming an Australian resident. | 71. Subsection 104-165(2) of the ITAA 1997 specifies you can choose to disregard a capital gain or loss when you cease Australian residency. The choice is not formally required to be provided to the Commissioner; however, the making of the choice is evidenced by their conduct in completing their income tax return. | 72. Subsection 104-65(3) of the ITAA 1997 provides that in making the choice all CGT assets at this time are taken to be taxable Australian property until either subsection 104-165(3)(a) or 104-165(3)(b) applies to your circumstances. | 73. In determining the character of the options in Company A for the purposes of the present ruling application it is necessary to further consider what section 104-165(3) means when it provides that 'each of those assets is taken to be taxable Australian property'. | 74. Section 855-15 of the ITAA 1997 provides a table of 5 categories that are taxable Australian property. Item 5 of the table describes: | 65 A CGT asset that is covered by subsection 104-165(3) (choosing to disregard a gain or loss on ceasing to be an Australian resident) | 75. Item 5 indicates that any CGT asset can be taken to be taxable Australian property for the purposes of subsection 104-165(3) of the ITAA 1997. The modifications in section 104-165 and section 855-15 of the ITAA 1997 do not operate to replace the character or nature of the CGT asset in question but rather indicate that for purposes of the ITAA 1997 it has the attribute of taxable Australian property. | 76. This is further supported by the explanatory memorandum that supported the introduction of section 104-165(3) of the ITAA 1997. The explanatory memorandum to the Tax Laws Amendment (2006 Measures No. 4) Bill 2006 Tax Laws Amendment (2006 Measures No. 4) Act 2006 (EM) indicated what taxable Australian property is at paragraph 4.22: | 69 A foreign resident is subject to Australian CGT if the relevant asset in relation to a CGT event is taxable Australian property. With one exception, an asset can only be taxable Australian property if it consists of an interest in either real property or the business assets of an Australian permanent establishment of a foreign resident. Applying Australian CGT to foreign residents only on these assets means Australia is more closely aligned with accepted international practice. | 77. Taxable Australian property is a category in which multiple CGT assets can rest, namely an interest in real property or the business assets of an Australian permanent establishment of a foreign resident. These categories are not exhaustive in their ordinary meaning. Taxable Australian property could refer to a number of different types of assets. In further determining what taxable Australian property can mean for the purposes of subsection 104-165(3) of the ITAA 1997 paragraph 4.25 of the EM provides: | CGT assets covered by CGT event I1 include all assets that are not taxable Australian property and any indirect Australian real property interests (see paragraph 4.104). Where a taxpayer makes this choice, subsection 104-165(3) deems those assets that were the subject of the choice to be taxable Australian property. These assets are item 5 in the table in section 855-15 of the ITAA 1997. | 78. Section 104-165(3) of the ITAA 1997 will deem the relevant assets to be taxable Australian property for the purposes of the ITAA 1997, but it does not change the character of the assets. This much is expressly absent from the explanatory memorandum, and it is consistent with the ordinary meaning that taxable Australian property can cover multiple types of CGT assets. This reasoning is supported in the judgment by Davies, Moshinsky and Colvin JJ in Peter Greensill Family Co Pty Ltd (as trustee) v FC of T; Nicholas Martin & Anor v FC of T (2021) ATC 24449 at paragraph 69: | 79. Parliament wanted to preserve (and extend through interposed entities) Australia's right to impose CGT on taxable Australian property and never expressed an intention to raise capital gains from foreign residents in relation to non- taxable Australian property. That intention was said to be reflected in the changes introduced by div 855, which focuses solely on the character of the CGT asset and no other criteria, such as the character of the taxpayer or the type of CGT asset. | Application to your circumstances: | Disposal of Company A shares | 80. The Taxpayer ceased to be an Australian resident for taxation purposes on DD MM 20XX, when they relocated permanently to Country A. At that time, they held unexercised Options granted under the 20XX Company A Employee Option Plan, which qualify for the start-up employee share scheme concession under section 83A-33 of the ITAA 1997. | 81. The Options constitute CGT assets for the purposes of the ITAA 1997. Upon exercise of the Options while they are a foreign resident, they will acquire shares in Company A. Those shares, in ordinary operation, do not fall within any of the 5 categories of taxable Australian property set out in section 855-15 of the ITAA 1997. | 82. Under section 855-10 of the ITAA 1997, a capital gain or capital loss from a CGT event is disregarded where: | (1) you are a foreign resident immediately before the CGT event, and | (2) the CGT event happens in relation to a CGT asset that is not taxable Australian property. | 83. Accordingly, if the shares are not treated as taxable Australian property, and you are a foreign resident at the time of their disposal, any capital gain or capital loss made on disposal of those shares will be disregarded for Australian tax purposes. | Are the shares taxable Australian property? | 84. Upon ceasing Australian residency on DD MM 20XX, CGT event I1 occurred under section 104-160 of the ITAA 1997. Under section 104-165 of the ITAA 1997, the Taxpayer is entitled to choose to disregard any capital gain or loss arising under CGT event I1 in respect of all CGT assets they owned at that time, including the Options. | 85. The operation of section 104-165 does not alter the type of CGT asset, but rather modifies its character for Australian tax purposes. Accordingly, where the choice under section 104-165 is made to disregard CGT event I1, the Options retain their nature as options to acquire shares but are taken to be taxable Australian property for the purposes of the ITAA 1997. Whether this choice is made is determined by their conduct, including the manner in which they lodge their Australian income tax return for the relevant income year. | 86. If the Taxpayer makes the choice to disregard CGT event I1, and subsequently exercise their employee Options to acquire shares, those shares will not be taxable Australian property, as they are new assets distinct from the Options. | 87. If the choice under section 104-165 is not made, the Options are treated as having been disposed of when the Taxpayer ceases Australian residency, and the Company A shares acquired on exercise take their tax characteristics independently. The shares will not be taxable Australian property. | Conclusion | 88. In either case, Division 855 then applies in the ordinary manner to the disposal of the Company A shares. As the Company A shares are not taxable Australian property, and they are a foreign resident at the time of their disposal, any capital gain or capital loss made on that disposal is disregarded under section 855-10 of the ITAA 1997.