Private ruling: Residency - Employee Share Scheme - Start-up Company - capital gains tax
Date of advice: 17 March 2026
Published: 4 May 2026
Ruling period: Year ending 30 June 20YY | Year ending 30 June 20YY | Year ending 30 June 20YY | Year ending 30 June 20YY
Date scheme commenced: 01 July 20YY

Ruling: Q1: Did you cease to be a tax resident of Australia following your permanent relocation to Country A in MM 20YY? | A1: Yes

Relevant facts and circumstances: You are a citizen of Australia. You were born in Australia. You were a tax resident of Australia and resided in Australia. You relocated from Australia to reside permanently in Country A in MM 20YY. You relocated to Country A on a permanent basis for a period of at least X years, but possibly longer. Family: • You have no spouse or any child dependents. Visa and employment information: • You were granted a Skilled Worker Migrant Visa in Country A, approved on DD MM 20YY, valid for a period of X years. • Upon relocating to Country A, your employment duties are now carried out exclusively from Country A. You will not carry out your employment from Australia and you will not be employed by an Australian employer. • You are employed by Company A under a Country A employment contract under Country A law. Accommodation • In MM 20YY, you entered into a residential lease in Country A where you now reside permanently following your relocation. • Your Australian property was leased following your relocation overseas, and you will not have accommodation available in Australia. Day presence • At this stage, you have no intention to return to Australia. • You intend to spend less than 45 days per year in Australia to visit friends and family. Assets - personally owned • You have provided a list of your assets and this includes an Australian residential property, and Australian bank accounts. • You intended to continue holding the majority of your Australian shares after your relocation to Country A. • Cash from your Australian bank accounts will be transferred to the Country A for living and investment purposes. Other • You have notified the Australian banks that you are a non-resident of Australia. • You have advised the Australian Electoral Roll that you are a non-resident of Australia. • You have informed Medicare that you are residing overseas and cancelled your Australian private health insurance. • You shipped your personal belongings to Country A. • You will be a tax resident of Country A, and subject to the domestic tax laws of Country A. • You ceased memberships of social and sporting clubs in Australia. • You were not eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS). Company B Start-up Employee Option Plan • You were employed by Company B in Australia. • In respect to your employment with Company B, you participated in the 20YY Country B's Employee Option Plan. Company B advised you in their offer letters that the ESS options granted to you qualify for the 'Start-up' ESS Concession under section 83A-33 of the ITAA 1997 (Company B Start-Up ESOP). • You were granted XXX Company B Options on DD MM 20YY under the Company B's Start-Up ESOP Plan. All options under the Start-Up ESOP are now fully vested but unexercised. The remaining unexercised Start-Up Options held are XXX. The exercise price in respect of the option is US$XXX. • You intend to exercise the options and sell the shares under the Company B Start-Up ESOP while you are a non-resident of Australia for tax purposes. Variation to the terms of your employment contract On DD MM 20YY, you were provided with a letter from Company B addressing a variation to the terms of your employment contract. Company B confirmed that your employment would commence on DD MM 20YY with Company A in Country A. It is a condition of your employment that you relocate from your primary residence in Australia to Country A by the commencement date. In the event you have not relocated ..., this letter is void and your offer of employment will be automatically rescinded or your employment will be terminated, as the case may be. You will be appointed to the role of XXX XXX with Company A. You will be based at Company A's premises in Country A, on a permanent, full-time basis. Your employment contract will take effect on DD MM 20YY. Employee Option Plan - Company B, Date DD MM 20YY Vesting of Options Treatment for Options for Leavers ... an Option holder is a "leaver" if the Option holder ceases to be employed or contracted by a Company Group Member ... Imposition of additional requirements (c) The Option holder acknowledged that the laws of the country in which Option holder is working at the time of: (1) the grant of an Option; (2) accepting an Offer; (3) the exercise of an Option; or (4) the acquisition or sale of Option Shares. (including any rules or regulations governing securities, foreign exchange, tax, labour, or other matters) may subject the Option holder to additional procedural or regulatory requirements as a result of an additional requirement imposed under rule 14(a). The Option holder agrees that the Option holder is and will be solely responsible for and must fulfil any such additional procedural or regulatory requirements. Disposal - covers the restrictions on the sale of the Options, permitted disposals, no disposal before exit event, and overriding restriction on disposal in first 3 years. Company B Employee Option Plan On DD MM 20YY, you were provided with an Offer under Employee Option Plan. The offer invited you to participate in the Employee Option Plan of Company B on the terms set out in the offer letter and the Employee Option Plan. The offer provided: Number of Options: XXX Exercise Price: US$XXX per Option Vesting Commence Date / Vesting conditions The notice of Stock Option Grant and Stock Option Agreement, sets out the vesting conditions that apply to the Options. Other terms The rights and obligations which apply to Options, including in relation to vesting, disposal and forfeiture, are specified in the: Employee Option Plan ...; and The notice of stock option grant and stock option agreement ..., which you will be required to sign and accept. These documents govern the Options that are issued to you. The Company considers that this offer of Options will qualify to access the 'start-up' tax concessions in the Australian tax legislation. On that basis under Australian tax law: • you will not be taxed on grant, vesting or exercise of the Options; • you will only be taxed on transfer of the shares or Options; • for capital gains tax (CGT) purposes, the shares you receive on exercise of the Options will be deemed to have been acquired on the day the Options are granted; and • any gain or loss you make on disposal of the shares or Options will be assessed under the CGT rules. Provided you were granted the Options at least 12 months prior to disposing of the shares or Options, you should be entitled to apply the CGT discount to reduce the gain, after applying any current or prior year capital losses. You are not required to pay any consideration in relation to your acceptance of this offer or the Company issuing the Options to you. To accept this offer, you must electronically sign the following items, on the Company's contract management platform and by the required time. Acceptance of Offer On DD MM 20YY, you accepted and signed the offer to participate in the Company's Employee Option Plan. Company B's Stock Option Plan, Company B, Employee Option Plan, Notice of Stock Option Grant was addressed to you. The signing by you and the Company's representative accepting or exercising this Option, you and the Company agree that this Option is granted under and governed by the terms and conditions of this Notice and the Company B Employee Option Plan. ... The parties have executed this Exercise Agreement as of the date first set forth above, signed by the directors of Company B and you dated DD MM 20YY. Documents provided, Company B, Employee Option Plan, Stock Option Agreement and the Exercise Agreement

Relevant legislative provisions: Income Tax Assessment Act 1997 Division 83A | Income Tax Assessment Act 1997 subdivision 83A-C | Income Tax Assessment Act 1997 section 83A-120 | Income Tax Assessment Act 1997 section 995-1 | Income Tax Assessment Act 1997 Division 855

Reasons for decision: Summary: 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). The terms 'resident' and 'resident of Australia', as applied to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition offers four 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. 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'. 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). Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals . We have considered the statutory tests listed above in relation to your situation as follows: | Detailed Reasoning - The resides test: 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'. 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. ... The test is whether the person has retained a continuity of association with the place ... together with an intention to return to that place and an attitude that that place remains "home"... where 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. 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 • social and living arrangements. 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. 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. | Detailed Reasoning - Application to your situation: You are not a resident of Australia under the resides test for the period of this ruling based on the following: • You have no intention of returning to Australia in the foreseeable future. • You have no wife or dependent children in Australia. • You intend to spend less than 45 days per year in Australia to visit friends and family. • You have entered into a residential lease in Country A from MM 20YY. • You accepted an employment contract with Company A, confirming your employment commenced on DD MM 20YY. It was a condition of your employment that you relocate from Australia to Country A by the commencement date. | Detailed Reasoning - Maintenance and location of asset: You maintain Australian bank accounts in Australia and own an investment property. The bank accounts in Australia is primarily used to facilitate the payment of ongoing cost associated with the investment property. You are not a member of an Australian superannuation fund. • Furniture and appliances were either sold or shipped to Country A. • You transferred your car to your mother prior to relocating to Country A. • Your Australian residential property was leased when you relocated to Country A. In your case, you are still a citizen of Australia and moved to Country A in MM 20YY on a Skilled Worker Migrant Visa. | Detailed Reasoning - Social and living arrangements: You ceased all memberships of social and sporting clubs in Australia prior to relocating to the Country A. Based on the information you have provided; the Commissioner is satisfied that you are not residing in Australia according to the ordinary concepts. This may change if you decide to return to Australia and meet the residency test for tax purposes. You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test). | Detailed Reasoning - Domicile test: Under the domicile test, you are a resident of Australia if your domicile is in Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia. | Detailed Reasoning - Domicile: Whether your domicile is in Australia is determined by the Domicile Act 1982 and the common law rules on domicile. 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. | Detailed Reasoning - Application to your situation: In your case, you were born in Australia and your domicile of origin is Australia. It is considered that you have abandoned your domicile of origin in Australia when you relocated to Country A for an employment opportunity with Company A. You have acquired the domicile of choice in Country A. | Detailed Reasoning - Permanent place of abode: 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. 'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory. 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. 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 • whether the taxpayer is living in a town, city, region or country in a permanent way. 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 • 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. 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. | Detailed Reasoning - Place of abode: The expression "place of abode" refers to a person's residence, where one lives with one's family and sleeps at night (R v. Hammond (1852) 117 E.R. 1477 at p. 1488; Levene v. I.R.C.(1928) A.C.217 and I.R.C. v. Lysaght (1928) A.C.234). In essence, a person's "place of abode" is that person's dwelling place or the physical surroundings in which a person lives. | Detailed Reasoning - Permanent: The leading case on whether a permanent place of abode is outside Australia is F.C. of T. v. Applegate (79 ATC 4307;(1979) 9 ATR 899). The taxpayer, whose domicile was in Australia, had been sent by his employer, a firm of solicitors, to establish a branch office in Vila, New Hebrides. His absence was to be for an indefinite period in the sense that the period was not specified or defined but it was expected that it would be of a substantial length. It was also expected that later he would be recalled to Australia. In fact, he returned to Australia after 2 years, his stay being cut short by illness. The taxpayer claimed that the salary he earned in Vila was exempt from Australian tax being income derived by a non-resident from sources wholly out of Australia. In that case, it was decided that, because the taxpayer could not be considered to have resided in Australia under the ordinary meaning of the word "reside", the extended definition of "resident" contained in paragraph (a)(i) had to be considered. Both the Supreme Court of New South Wales and, on appeal, the Full Court of the Federal Court of Australia held that the taxpayer had a permanent place of abode outside Australia. He was therefore a non-resident in the year of income concerned. The Federal Court rejected the Commissioner's argument that a permanent place of abode outside Australia required an intention to live outside Australia indefinitely without any intention of returning to live in Australia in the foreseeable future, other than at some remote, albeit specific, point of time. The Court said that the term "permanent" must be interpreted in the context in which it appears. The Court said that in its context in the "resident" definition a permanent place of abode does not have to be "everlasting" or "forever". It means something less than a permanent place of abode in which a person intends to live for the rest of his or her life. | Detailed Reasoning - Application to your situation: The Commissioner is satisfied that your permanent place of abode is outside Australia because: You departed Australia in MM 20YY, relocating to Country A, and do not intend to return to live in Australia in the foreseeable future. You have leased your Australia residential property. You have rented a property in Country A to reside. You were granted a Skilled Migrant Worker Visa to work in Country A for the period of X years. You are employed by Company A and it was a requirement of your employment contract that you move to Country A where you perform your work duties. You have advised Australian government agencies, Medicare and the Australian Electoral Roll, that you are a non-resident of Australia. Therefore you are not a resident of Australia under the domicile test. | Detailed Reasoning - 183-day test: 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. | Detailed Reasoning - Application to your situation: You had not resided in Australia for 183 days when you relocated to Country A during the 20YY income year. Therefore you are not a resident under this test. | Detailed Reasoning - Superannuation test: An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16 of such a person. | Detailed Reasoning - Application to your situation: You are not a member on behalf of whom contributions are being made to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not a resident under this test. | Detailed Reasoning - Conclusion: As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for the year 30 June 20YY to 30 June 20YY, unless your contract ends and you return to live permanently in Australia. | Detailed Reasoning - Question 2: Will any capital gain (or loss) made from the disposal of your shares in Company B which were granted under a qualifying 'Start-up' Employee Share Scheme (ESS) be disregarded where you are a non-resident at the time of disposal of the shares? | Summary: Yes. If you are a non-resident when you dispose of your Company B shares, the shares will not be taxable Australian property, and any capital gain or capital loss can be disregarded upon the disposal. | Detailed Reasoning - Capital gains and foreign residents: Generally, a discount you receive on shares, rights or stapled securities you acquire under an employee share scheme (ESS) is included in your assessable income when you acquire the beneficial interest in those shares, rights or securities. However, subdivision 83A-B of the ITAA 1997 provides concessions for 'start-up' companies if certain conditions laid out in the subdivision are met. Under the start-up rules, the discount on eligible ESS interests is not taxed under the ESS regime; instead, any gain or loss on disposal of the rights or shares is assessed under the capital gains tax regime. When an ESS option is exercised, CGT event C2 occurs but may be disregarded under subsection 134-1(4) of the ITAA 1997 (subject to certain conditions). When working out if the 50% CGT discount applies, the period of ownership of a share acquired on exercise of a right is taken to have started when the right was acquired (paragraph 115-30(1)(9A) of the ITAA 1997). In your case, you held options under the Plan when you ceased to be a tax resident of Australia. CGT event I1 happens when a taxpayer stops being a tax resident of Australia. The taxpayer is required to work out if they have made a capital gain or a capital loss for each CGT asset owned just before the time of the event, i.e. for each asset owned just before the taxpayer ceased to be an Australian resident - apart from assets that are taxable Australian property (section 104-160 of the ITAA 1997). However, an individual can choose to disregard making a capital gain or loss from the CGT assets covered by CGT event I1 (the choice can only be made for all assets owned). If the individual so chooses 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, and b) the individual again becoming an Australian resident (section 104-165 of the ITAA 1997). The choice is made when lodging the income tax return for the relevant income year. Under the rules in Division 855 of the ITAA 1997, a foreign resident is only subject to CGT in Australia on 'taxable Australian property'. Under section 855-15 of the ITAA 1997, taxable Australian property includes direct or indirect interests in Australian real property, CGT assets used in carrying on a business in Australia and mining, quarrying or prospecting rights to minerals, petroleum or quarry materials situated in Australia. However, section 855-10 of the ITAA 1997 outlines that a capital gain or loss from a CGT event is disregarded if you are a foreign resident just before the CGT event happens and the CGT event happens in relation to a CGT asset that is not taxable Australian property. | Detailed Reasoning - Application to your situation: As outlined above, you ceased to be an Australian resident for taxation purposes when you left Australia in MM 20YY. When you left Australia, you held unexercised Options granted under the Company B Plan, being the Options. The resulting shares you will receive when you exercise the Options while you are overseas will not be taxable Australian property because they do not fall into any of the five categories set out in the table in section 855-15 of the ITAA 1997. As the resulting shares will not be taxable Australian property, and you will be a foreign resident when they are sold during the ruling period, you will be able to disregard any capital gain or capital loss made on their disposal made on their disposal under section 855-10. However, an individual can choose to disregard making a capital gain or loss from the CGT assets covered by CGT event I1 (the choice can only be made for all assets owned). If the individual so chooses 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, and b) the individual again becoming an Australian resident (section 104-165 of the ITAA 1997). The choice is made when lodging the income tax return for the relevant income year. Under the rules in Division 855, a foreign resident is only subject to CGT in Australia on 'taxable Australian property'. Under section 855-15, taxable Australian property includes direct or indirect interests in Australian real property, CGT assets used in carrying on a business in Australia and mining, quarrying or prospecting rights to minerals, petroleum or quarry materials situated in Australia. However, section 855-10 outlines that a capital gain or loss from a CGT event is disregarded if you are a foreign resident just before the CGT event happens and the CGT event happens in relation to a CGT asset that is not taxable Australian property.