Unrealised Capital Gains Tax in Australia: When Are Capital Gains Taxed?

Australia’s capital gains tax (CGT) regime is undergoing a reform in 2026–2027, with changes to the 50% tax discount rule and the introduction of a minimum tax on capital gains. 

Introduction of a tax on unrealised capital gains wasn’t one of the changes. The country’s CGT framework continues to be based on asset realisation rather than a simple increase in value. 

Still, many investors might be rightfully worried about the possibility that such a law could be introduced. To examine unrealised capital gains tax in Australia, this article will explore: 

• How the capital gains tax currently works in the country
• What would a tax on unrealised capital gains look like
• How certain trigger events may result in taxing capital gains before they are realised
• How to manage your capital gains tax position 

How Does Capital Gains Tax Work in Australia?

Capital gains tax is not a standalone tax in Australia. It forms part of income tax, and it’s currently taxed at the taxpayer’s marginal income tax rate. The tax is paid on the capital gain, which is the difference between an asset’s cost base and the capital proceeds from its sale. 

The tax is triggered by a capital gains tax event. While the sale of an asset is probably the most common example of a capital gains tax event, the Australian Taxation Office (ATO) lists more than 50 types of events that could lead to CGT liability, including: 

• The end of an asset, including its destruction, loss, or the expiry of an option to acquire it 
• Becoming entitled to an asset previously held in a trust
• Passing of an asset to a tax-advantaged entity upon death

A change in asset value is not a triggering event under the ATO’s definition. 

Capital gains are not the only possible outcome of a triggering event. It’s also possible to accrue losses from the disposal of assets, and you can use those losses to offset capital gains in the same tax year. 

Assets that are subject to the tax are typically called capital gains tax assets and include: 

• Real estate
• Shares, units, and other financial investment vehicles
• Cryptocurrencies 
• Expensive personal use assets
• Expensive collectables
• Foreign currency
• Intangible assets, such as leases

Certain assets are exempt from CGT, including your home, car or motorcycle, and depreciating assets such as business equipment. 

Bonus read: If you’re interested in exploring tax havens, read our guides to countries with no capital gains, property, income, or cryptocurrency taxes.

2026–2027 Changes to Capital Gains Tax

The 2026-2027 tax reform includes two notable changes to capital gains tax:

1. The 50% CGT discount will be replaced with cost-base indexing for an inflation-based discount
2. The minimum tax rate paid on capital gains will be 30% 

These changes will affect gains starting with July 1, 2027. While they might indicate the direction in which the government is willing to take capital gains tax, they do not include a provision for imposing tax on unrealised gains. The new rules will still apply only when an asset is sold or another CGT event occurs.

What Would a Tax on Unrealised Capital Gains in Australia Look Like?

Unrealised capital gains are increases in an asset’s value that haven’t yet been crystallised by a CGT event. If you purchased an asset for AUD 20,000, and it’s now worth AUD 30,000, the AUD 10,000 difference is an unrealised gain. It only exists on paper and can fluctuate before you dispose of the asset. 

A tax on unrealised capital gains would apply directly to these paper capital gains, creating a tax liability even if you haven’t sold the asset, received any money for it, or don’t plan to dispose of it at all. The methods countries use to tax unrealised gains include: 

1. Wealth tax 
2. Mark-to-market taxation
3. Periodic deemed disposal

Wealth Tax

A wealth tax generally applies to the net wealth of individuals above a certain threshold. While it doesn’t specifically target unrealised capital gains, they are captured if your total asset value is greater than the threshold. In this case, the unrealised gains are taxed together with the base cost of the asset.

Countries that have a wealth tax include: 

Country	Tax Threshold	Tax Rate
Norway	NOK 1,900,000	1%–1.1%
Switzerland	CHF 77,000–CHF 200,000	0.07%–1%
Spain	EUR 700,000	0.2%–3.5%
Uruguay	USD 160,000	0.1%

Mark-to-Market Taxation

The mark-to-market taxation model targets unrealised capital gains by requiring you to pay annual tax on the difference in value of CGT assets between the current and the previous year. 

In addition to other issues inherent with unrealised capital gains taxation, this model presents challenges when applied to illiquid assets, as their market value can be hard to determine. Countries that apply the mark-to-market taxation model, such as Denmark, limit it to highly liquid assets such as shares and units.

Periodic Deemed Disposal

Deemed disposal is a manoeuvre in which a country’s tax authorities treat eligible assets as if they’ve been sold and immediately re-acquired. While you never actually lose ownership of the value in such a case, this method creates a tax liability and sets a new base cost value. 

Deemed disposal is typically used to charge an exit tax, which is triggered when moving residence to another country. Ireland, however, does so periodically. Every eight years from acquiring an eligible asset, which in Ireland is a financial investment vehicle, you will be considered to have sold and bought the asset, and become liable for tax on all the capital gains accrued in that period. 

Australia’s Failed Unrealised Capital Gains Tax 

Although Australia doesn’t ordinarily tax unrealised capital gains, it recently came close to introducing such a tax. 

In 2023, the government released draft legislation for Division 296, a proposed additional 15% tax on large superannuation balances. The tax would have been imposed on superannuation balances over AUD 3 million and calculated based on the change in a member’s total superannuation balance in a tax year. Because the change in balance reflected the fund’s market value, including any increase in the price of assets that weren’t sold, the tax would have applied to unrealised capital gains. 

This proposal was criticised on various grounds, including: 

• Liquidity issues, as members could potentially lack the funds to pay for the tax since they haven’t profited from the sale of assets
• Lack of indexation, which could lead to more people being drawn into the scope of the tax due to inflation alone
• Introduction of a dangerous precedent, since the country’s tax system rests on the principle of gains being taxed only when realised

Following the criticism, the proposal underwent significant changes before being passed into law and enacted in tax year 2026–2027. The current provisions of Division 296 include: 

Provision	Explanation
Additional tax on large superannuation balances	15% on earnings attributable to balances over AUD 3 million
Additional tax on very large superannuation balances	Additional 10% (25% in total) on earnings attributable to balances over AUD 10 million
Basis of taxation	Realised earnings only
Indexation	Both thresholds indexed to CPI

Australia’s Exit Tax on Capital Gains

The CGT event that most closely resembles a tax on unrealised capital gains in Australia is CGT event I1, which applies when an individual or company stops being an Australian resident. It only occurs when you lose Australian tax residence, at which point your assets will undergo deemed disposal and create a liability you will have to disclose when submitting your tax return. This is commonly referred to as an exit tax.

Since you are liable to pay CGT on these assets only once (there’s no periodic charge), the exit tax can’t be considered an actual tax on unrealised gains, even though unrealised gains are subject to it.

Not all assets are subject to deemed disposal upon leaving the country’s tax residence. The event only applies to CGT assets that won’t be subject to the tax when you lose your tax residency status. Assets that are categorised as Taxable Australian Property (TAP) will remain subject to Australian CGT. These assets include: 

• Real estate located in Australia
• Indirect interest in Australian real estate
• Mining, prospecting, or quarrying right in the country
• Assets used to carry on a permanent business in Australia
• Options or rights over any of the other types of TAP assets 

It’s important to note that you can choose to disregard the deemed disposal and have all of your assets considered TAP. This decision will remain in effect until you either become a tax resident of Australia again or a CGT event occurs that creates tax liability. 

How To Manage Your Capital Gains Tax Liability

Although Australia didn’t pass a law introducing a tax on unrealised capital gains, several other changes affect your capital gains tax liability, as seen with tax events like I1. To manage your tax exposure, you should:

1. Time disposal before new CGT rules
2. Plan for Division 296 exposure
3. Prepare for a change in residence status 

Time Disposal Before New CGT Rules

Timing the disposal of your assets for a year with low income and a lower tax break used to be a crucial step for managing tax liabilities. The new minimum CGT rate significantly reduces the value of this strategy. 

However, the new CGT rules will affect realised gains that occur after July 1, 2027. Up until that point, you can consider whether disposing of certain assets while the old rules are in effect might allow you to reduce the amount you need to pay for CGT. 

Plan for Division 296 Exposure

The first tax assessment for Division 296 is scheduled for June 30, 2027. At this point, you should have already decided whether to reset the CGT cost base, which would benefit funds that hold a lot of assets with unrealised gains. If you choose to reset, prepare the necessary documentation to lodge the election. 

You might also be able to restructure your assets if you are close to reaching either threshold. The transition rule for the new tax stipulates that only the value of your assets on June 30, 2027, will be used to determine your tax liability, giving you some time to prepare.

Prepare for a Change in Residence Status

Choosing whether to trigger deemed disposal or defer CGT is a permanent decision that applies across your asset portfolio. 

Generally, triggering deemed disposal might be the better option if: 

• The current market value of your assets is close to the base price you paid for them
• You have capital losses you can use to offset the gains
• You want your assets to be outside of Australia’s tax system

Conversely, deferring might make sense if you have significant unrealised gains and liquidity issues, plan to hold the assets for a long period, or intend to return to Australia.

You should also be aware that, once you become a foreign tax resident, you may not be able to claim tax exemption on the sale of your main residence. If you plan to sell it, it might be better to do so while still a resident. 

It’s also important to know whether there’s a tax treaty between Australia and your destination. Tax treaties are used to avoid double taxation and are an important factor to consider when choosing a jurisdiction for a second residence. They are among the many reasons why including an international mobility professional in your preparations for a change of residence is crucial. For assistance with your international strategy, contact Nomad Capitalist.

Plan Your Exit From Australia With Nomad Capitalist

Nomad Capitalist is an advisory firm that focuses on wealth preservation and international mobility. We’ve helped more than 1,500 clients achieve their financial and lifestyle goals by planning their residence, securing access to international banking, protecting their assets, and exploring investment opportunities abroad. 

Nomad Capitalist can help you develop your international strategy and build an Action Plan to implement it. We create the Plans around our clients’ specific circumstances and desires, ensuring their step-by-step blueprints can be executed with maximum efficiency.

Here’s what partnering with Nomad Capitalist on an Action Plan looks like: 

1. We ask you to fill out a short form to help us determine whether we’re a good match
2. We schedule a 45-minute onboarding call to learn more about your situation and needs
3. Your case manager creates an Action Plan and presents it to you for approval 
4. We implement the Plan over a 12-month period
5. You continue receiving support from us even after the Plan is implemented

If you want to transfer your residency to another country, Nomad Capitalist can help you choose a jurisdiction that aligns with your priorities. We can assist you in navigating the process and advise you on potential challenges and the best way to address them. To start the process right away, contact Nomad Capitalist!