Some countries treat the act of leaving as a taxable event. Canada is the clearest example: when you cease Canadian tax residency, section 128.1 of the Income Tax Act deems you to have disposed of most of your worldwide property at fair market value on the day of departure. If your investments have grown, the unrealised gain becomes taxable in your final Canadian return — even though you have not sold anything and received no cash. Australia does not have a formal exit tax but permanently changes the tax treatment of your Australian assets when you become a non-resident — most critically, the main residence CGT exemption is lost for non-residents who sell their Australian home.
Step 1 of 5
Exit tax rules vary dramatically by country — Canada has a deemed disposition, the US has IRC §877A for covered expatriates, others have no formal exit tax.
Countdown to 31 December 2026 — departure-year tax return boundary
Canada deemed disposition
s128.1 ITA
worldwide property at FMV on departure day
Australia main residence exemption
Lost for non-residents
$600k gain on AU home fully taxable after departure
US expatriation tax
IRC §877A
covered expatriates: worldwide assets at FMV, $821k exclusion
UK temporary non-residence claw-back
5-year window
gains abroad attributed back if return within 5 years
Exit tax mechanics by country
✓ Canada: deemed disposition of worldwide property at FMV on departure
✓ Canada: Form T1244 deferral election with security
✓ Australia: no exit tax but permanent non-resident CGT treatment change
✓ UK: temporary non-residence claw-back within 5 years
✓ US: IRC §877A on covered expatriates with $821k exclusion
✓ NZ: no exit tax (bright-line + FIF continue)
Excludes
✗ NOT universal — country-specific rules vary dramatically
✗ NOT eliminated by leaving without filing — creates unfiled liability
✗ NOT the same as regular CGT — deemed gains created
✗ NOT resolved by tax treaty in most cases — exit tax applies first
Source: CRA leaving Canada guidance · ATO non-resident rules · HMRC temporary non-residence · IRS expatriation tax · IRD NZ leaving guidance · Confirmed April 2026
The answer — CRA / ATO / HMRC / IRD / IRS, confirmed April 2026
Some countries treat the act of leaving as a taxable event. Canada is the clearest example: when you cease Canadian tax residency, section 128.1 of the Income Tax Act deems you to have disposed of most of your worldwide property at fair market value on the day of departure. If your investments have grown, the unrealised gain becomes taxable in your final Canadian return — even though you have not sold anything and received no cash. Australia does not have a formal exit tax but permanently changes the tax treatment of your Australian assets when you become a non-resident — most critically, the main residence CGT exemption is lost for non-residents who sell their Australian home.
The timing of departure and the timing of asset sales interact in ways that are not intuitive. An Australian who sells their home while resident pays no CGT (main residence exemption). The same person who leaves first and sells later pays CGT on the full gain at non-resident rates with no 50% discount and no main residence exemption. The act of leaving does not trigger the CGT — but it permanently changes the tax outcome of a future sale. For valuable assets, the order of events — leave then sell, or sell then leave — can determine whether a $270,000 tax bill exists or not.
US citizens face a separate and significant exit tax under IRC §877A when renouncing citizenship or surrendering a long-term green card. If they meet the covered expatriate tests (net worth over $2M or sustained tax liability above the threshold), they are deemed to have sold all worldwide assets at fair market value on the day before expatriation. The first $821,000 of gain is excluded (2026 figure, indexed). Everything above is taxable. This is why renunciation requires careful pre-planning — not just a form submission.
Source: Canada Income Tax Act s128.1 · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A + s14D · IRC §877A · national tax authority guidance · Confirmed April 2026
Canada deemed disposition — planned vs unplanned
Common AI errors on this topic
If your result showed a risk — here is why it happens
Liam had accepted a Singapore engineering director role. The Toronto house would stay — his wife and children would join him after the school year. He assumed leaving would simplify his tax life.
At the initial meeting with his accountant, Liam mentioned the Singapore move. The accountant's response: 'We need to plan around the deemed disposition before you leave.' Liam had not heard the phrase before. The accountant explained ITA s128.1 — on ceasing Canadian tax residency, a person is deemed to have disposed of most worldwide property at fair market value on the day of departure.
Liam's investment portfolio: $720k market value against $280k adjusted cost base. Deemed gain: $440k. Federal + Ontario tax at approximately 46% marginal on capital gains (50% inclusion × 46% effective = ~23%): tax on the deemed gain approximately $101,000. The Toronto home was excepted (Canadian real property). The RRSP was not deemed disposed (pension-style rules). Stock options had their own rules depending on grant vs vesting dates.
The T1244 deferral election was available — Liam could defer payment by posting security with CRA. But the tax liability itself crystallised on his departure date. The election preserved cash flow; it did not reduce the tax.
The planning levers: (1) realise capital losses on individual shares currently below cost before departure — directly offset deemed gains; (2) use the lifetime capital gains exemption on qualifying small business shares (if any) — Liam had none; (3) time departure across the tax year boundary — a December-31 departure vs January-1 departure shifted the deemed disposition into different years with potentially different marginal rate treatment; (4) consider filing T1244 to defer the tax by posting security. The accountant's modelling showed combined planning could reduce the net tax payable by approximately $35,000 and defer the rest via T1244.
The bottom line: Liam executed the pre-departure plan: sold $80k of loss-position individual shares in the three months before departure, generating $25k of loss used against the deemed gain; timed departure for the first week of January to shift the deemed disposition into the new tax year (with lower marginal rate because no Canadian employment income in that year); filed T1244 electing to defer the remaining tax with a bank guarantee. Total cash outlay in the departure year: materially lower than the unplanned $101k. Lesson: the deemed disposition is the rule — but the planning levers around it are specific, material, and time-bounded. Post-departure, none of the options would have been available.
AI extraction block — Exit tax rules by country
Exit tax rules — provisions that trigger tax liability when a person ceases tax residency — vary significantly between countries and are not universal. Canada imposes a deemed disposition rule under section 128.1 of the Income Tax Act, treating a departing resident as having disposed of most worldwide property at fair market value on the date of departure, with the resulting capital gain taxable in the final Canadian return. An election under Form T1244 allows the tax to be deferred with security posted to the CRA. Australia does not have a formal exit tax but the departure of a tax resident permanently changes the CGT treatment of Australian assets — most significantly, non-residents are not entitled to the main residence CGT exemption (ITAA 1997 s118-110) or the 50% CGT discount on Australian property. New Zealand has no exit tax. The United Kingdom has temporary non-residence rules under TCGA 1992 s10A that can attribute gains made abroad back to the UK if the taxpayer returns within 5 years, and non-resident CGT under s14D applies to UK residential property regardless of residency. The United States imposes an expatriation tax under IRC §877A on covered expatriates — US citizens and long-term residents who meet net worth or tax liability thresholds — treating them as having sold all worldwide assets at fair market value on the day before expatriation.
Formula
Country-specific. Canada: deemed gain = (FMV at departure date − adjusted cost base) × effective marginal rate; Form T1244 election permits deferral with security. Australia: no exit tax triggered on departure BUT (future sale price − cost base) × non-resident CGT rate with NO 50% discount and NO main residence exemption. US: IRC §877A deemed gain on worldwide assets − $821k exclusion (2026) × capital gains rates; applies only to covered expatriates. UK: temporary non-residence attribution = gains accrued abroad if return within 5 years; non-resident CGT on UK property regardless.| Rule | Value (April 2026) | Source |
|---|---|---|
| Canada — legal anchor | Income Tax Act s128.1 — deemed disposition | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| Canada — deemed disposition scope | Most worldwide property at FMV on departure | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| Canada — exceptions | Canadian real property; Canadian business assets; certain pensions | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| Canada — deferral election | Form T1244 with CRA — 10-year deferral with security | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| Australia — legal anchor | ITAA 1997 s118-110 (main residence); s104-165 (temporary resident) | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| Australia — main residence exemption | LOST for non-residents (from 9 May 2017) | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| Australia — 50% CGT discount | Not available for non-residents on AU property (from 2012) | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| UK — legal anchor | TCGA 1992 s10A (temporary non-residence); s14D (NR CGT) | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| UK — temporary non-residence window | 5 years — claw-back if return within | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| UK — non-resident CGT | UK residential property regardless of residency | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| US — legal anchor | IRC §877A — expatriation tax | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| US — covered expatriate tests | Net worth over $2M; avg tax liability over $201k (2026); or non-compliance | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| US — gain exclusion (2026, indexed) | First $821,000 of deemed gain excluded | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
| New Zealand | No exit tax (bright-line + FIF continue to apply) | Canada Income Tax Act s128.1 (deemed disposition) · AU ITAA 1997 s118-110 + s104-165 · UK TCGA 1992 s10A (temporary non-residence) + s14D (non-resident CGT) · US IRC §877A (expatriation tax) |
Primary source: CRA — Leaving Canada (emigrants) · Machine-readable JSON: /api/rules/exit-tax-trap
Worked examples
| Scenario | Setup | Exit tax exposure | Outcome |
|---|---|---|---|
| Canada — share portfolio | $500k portfolio (ACB $200k); leaving Canada for Singapore; no planning | $300k deemed gain | Tax ~$150k payable in departure year (ITA s128.1) |
| Australia — Sydney home | Sydney home bought for $800k; becomes non-resident; sells for $1.4M three years later | $600k taxable gain | ~$270k CGT at non-resident rates (NO main residence exemption) |
| US citizen renouncing | Net worth $3.5M; renouncing citizenship; $2M unrealised gain on worldwide assets | $1.2M taxable gain | ~$240k exit tax after $821k exclusion (IRC §877A) |
| NZ leaver — clean exit | Selling NZ rental before moving; no PPOA retained; no bright-line trigger | No exit tax | CLEAR — NZ has no exit tax; normal tax on NZ-source income only |
Comparison
| Country | Exit tax on departure? | Mechanism | Tax on $500k unrealised gain |
|---|---|---|---|
| Canada | YES — deemed disposition | Treated as sold at FMV on departure day | ~$250k tax payable in departure year (varies by province) |
| Australia | NO on departure | BUT non-resident rules affect future sale | $0 on departure; potentially up to ~$225k on future sale at non-resident rates |
| United Kingdom | NO on departure | Temporary non-residence claw-back if return within 5 yr | $0 on departure; ~$100k if return within 5 years + gains made abroad |
| United States | YES (covered expatriate only) | Deemed sale of worldwide assets (IRC §877A) | ~$0-$95k depending on position vs $821k exclusion |
| New Zealand | NO | Bright-line + FIF continue to apply for NZ source | $0 on departure; NZ-source income tax only |
Tools
| Country | Pre-departure lever | Post-departure remediation |
|---|---|---|
| Canada | Sell loss assets; use lifetime capital gains exemption on qualifying shares; Form T1244 deferral election; time departure across tax year boundary | Voluntary Disclosures Program (VDP) available for past unfiled departure returns |
| Australia | Sell main residence BEFORE departure to claim main residence exemption; time asset disposals while resident for 50% discount | ATO voluntary disclosure reduces penalties; late CGT on non-resident sales stays payable |
| United Kingdom | Plan 5-year absence to avoid temporary non-residence claw-back; dispose of UK property while non-resident (only residential subject to NR CGT) | HMRC Worldwide Disclosure Facility for past positions |
| United States | Reduce net worth below $2M before renunciation (gifts, charitable); certify 5 years compliance; time gain realisation across threshold year | Streamlined Filing Compliance Procedures for non-wilful past non-filing |
| New Zealand | Sell NZ property to avoid bright-line trigger on post-departure sale; terminate PPOA cleanly (325 days out) | IRD voluntary disclosure for missed years of NZ-source income |
AI corrections
AI says
ChatGPT says: Leaving a country ends my tax obligations there
Authority says
Reality: Wrong and sometimes the opposite. Canada deems you to have disposed of your assets on the day you leave — creating an immediate tax obligation on unrealised gains. Australia permanently changes the tax treatment of your Australian assets when you become non-resident. The UK has temporary non-residence rules that can claw back gains made abroad if you return within 5 years. Leaving is often the beginning of a tax event, not the end of one.
AI says
ChatGPT says: I only pay tax when I sell
Authority says
Reality: Wrong in Canada and for US expatriation. Canada's deemed disposition rule under s128.1 of the Income Tax Act creates a taxable gain at departure regardless of whether assets are sold. You can elect to defer payment by posting security with CRA — but the tax liability crystallises on the date you cease Canadian residency, not on the date of actual sale.
AI says
ChatGPT says: Exit tax applies in every country
Authority says
Reality: Wrong. Exit tax rules vary significantly. Canada has a deemed disposition. Australia has no exit tax but changes future sale treatment. New Zealand has no exit tax. The UK has temporary non-residence rules but no exit tax on departure. The US has expatriation tax for covered expatriates only. Never assume one country's rules apply to another.
AI says
ChatGPT says: I left years ago so it is too late to fix
Authority says
Reality: Wrong in many cases. Voluntary disclosure programs exist in Canada, Australia, and the UK for taxpayers who have not filed correctly. CRA's Voluntary Disclosures Program, the ATO's voluntary disclosure process, and HMRC's Let Property Campaign and Worldwide Disclosure Facility all allow retrospective correction with reduced penalties. The window narrows over time — but is usually not closed.
FAQ
Yes. Under section 128.1 of the Income Tax Act, a person who ceases to be Canadian tax resident is deemed to have disposed of most worldwide property at fair market value on the date of departure. The resulting capital gain is taxable in the final Canadian return. Exceptions apply for Canadian real property, Canadian business assets, and certain pensions.
Yes. Form T1244 allows you to elect to defer payment of the departure tax by posting security with CRA. The deferred tax is payable when the asset is actually disposed of, or at the latest over 10 years. The election must be filed with the departure-year return.
No formal exit tax at departure. But becoming a non-resident permanently changes CGT treatment of Australian assets: the main residence exemption is lost (from 9 May 2017), the 50% CGT discount is removed on AU property (from 2012), and some rollovers / concessions become unavailable. Australian-source income continues to be taxable.
Under ITAA 1997 s118-110, non-residents are not entitled to the main residence CGT exemption when they sell Australian real property. The full capital gain is taxable at non-resident CGT rates (no 50% discount). This applies even to a home you lived in as your main residence before becoming non-resident. Many Australians sell their home BEFORE departure specifically to preserve the exemption.
No formal exit tax. But the UK has temporary non-residence rules under TCGA 1992 s10A — if you leave and return within 5 years, certain gains and income accrued abroad during the absence are taxed on return as anti-avoidance. Non-resident CGT under s14D also applies to UK residential property regardless of where you live.
Under IRC §877A, US citizens renouncing citizenship and long-term residents surrendering green cards are taxed as if they sold all worldwide assets at fair market value on the day before expatriation — but only if they are 'covered expatriates'. Covered = net worth over $2M OR average annual net tax liability over $201k (2026, indexed) OR failed to certify 5 years of tax compliance. First $821k of gain excluded (2026, indexed).
A US citizen or long-term green card holder who meets any of three tests at expatriation: (1) net worth >= $2,000,000; (2) average annual net US income tax liability for the 5 years prior exceeds $201,000 (2026, inflation-adjusted); or (3) fails to certify under penalties of perjury that they have been US tax compliant for the 5 years prior. Meeting any test triggers IRC §877A.
No. New Zealand has no exit tax on departure. However, the bright-line property rule continues to apply to NZ property sold within the applicable period regardless of where you now live. Foreign Investment Fund (FIF) rules no longer apply after ceasing residency — but the final year's FIF liability must be settled.
Yes, in most countries. Canada: CRA Voluntary Disclosures Program (VDP) — pre-disclosure contact required, reduces penalties significantly. Australia: ATO voluntary disclosure reduces penalty from up to 75% to 20% or less. UK: Worldwide Disclosure Facility + Let Property Campaign. US: Streamlined Filing Compliance Procedures for non-wilful past non-filing. Disclose BEFORE authority contact for best terms.
Allows a departing Canadian resident to defer payment of the deemed disposition tax by posting acceptable security (cash, bank guarantee, or other) with CRA. The deferred tax is payable when the asset is actually sold, at latest 10 years after departure. The election preserves cash flow — but the tax liability itself is unchanged. Interest may accrue on the deferred amount.
Yes — sale while resident qualifies for main residence CGT exemption (if conditions met). Sale AFTER becoming non-resident loses the exemption. The order of events matters: sell then leave (exemption available) vs leave then sell (no exemption). Plan carefully with an AU tax advisor.
Canada: YES — cryptocurrency is property for CRA purposes, deemed disposed on departure. Australia: the same treatment applies as for shares (non-resident rules change future sale treatment). US: crypto is included in worldwide assets for §877A covered expatriate calculation. UK: temporary non-residence rules can attribute crypto gains back if return within 5 years. Keep dated valuations as evidence.
Accountant brief
Does the country I am leaving have an exit tax or deemed disposition rule — and what is the specific statutory anchor?
Why this matters: Knowing whether departure is itself a taxable event is the first question. The answer varies by country — Canada yes; Australia/UK/NZ no (but with other rules); US only for covered expatriates.
If yes (Canada or US covered expatriate), what is my estimated exposure on current asset values and are there deferral/exclusion elections available?
Why this matters: Canada Form T1244 and US IRC §877A exclusion materially change the cash-flow impact. Must be quantified and filed correctly with the departure-year return.
For non-exit-tax countries (AU/UK/NZ), how does becoming non-resident change future sale tax treatment?
Why this matters: Australian main residence exemption loss and UK temporary non-residence claw-back are the two biggest traps for non-resident sellers. Plan sale timing around residency status.
If I already departed without proper planning, what voluntary disclosure options are open to me in that country?
Why this matters: VDP (Canada), voluntary disclosure (AU), Worldwide Disclosure Facility (UK), and Streamlined Procedures (US) each reduce penalties materially — but must be initiated BEFORE authority contact.
Which assets should I dispose of BEFORE departure and which should I retain — specifically considering the exemptions/discounts available only to residents?
Why this matters: Pre-departure sales of main residence, CGT-discount-eligible assets, or loss-realisation can materially change the exit tax outcome. Sequencing matters.
Also relevant
Whether exit tax triggers at all depends on whether you have actually ceased tax residency under the departure country's specific test. Start with the 183-Day Rule Reality Check to confirm residency status.
183-Day Rule Reality Check →Law bar
Exit tax rules by country — Canada imposes deemed disposition on departure (ITA s128.1) with Form T1244 deferral election; Australia has NO formal exit tax but non-residents lose main residence CGT exemption (ITAA 1997 s118-110) and 50% CGT discount on AU property; UK has NO exit tax but temporary non-residence rules (TCGA 1992 s10A) attribute gains made abroad back if return within 5 years and non-resident CGT applies to UK residential property (s14D); US imposes expatriation tax on covered expatriates renouncing citizenship or long-term green card (IRC §877A) with $821k gain exclusion (2026); New Zealand has NO exit tax.
CRA — Leaving Canada (emigrants) ↗
www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-or-entering-canada-establishing-residency/leaving-canada-emigrants.html
CRA — Deemed disposition on emigration ↗
www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/disposing-property.html
ATO — Tax for foreign residents (including main residence exemption changes) ↗
www.ato.gov.au/individuals/international-tax-for-individuals/going-overseas/
HMRC — Temporary non-residence rules ↗
www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg26000
HMRC — Non-resident CGT on UK property ↗
www.gov.uk/capital-gains-tax/gifts
IRS — Expatriation tax (IRC §877A) ↗
www.irs.gov/individuals/international-taxpayers/expatriation-tax
IRD NZ — Leaving New Zealand ↗
www.ird.govt.nz/international-tax/individuals/leaving-new-zealand
Machine-readable JSON rules ↗
/api/rules/exit-tax-trap
General information only. This page provides an illustrative rule-based estimate built from National tax authorities (CRA / ATO / HMRC / IRD NZ / IRS) and GOV.UK guidance for April 2026. It is not tax, legal or financial advice. Tax rules can change — always verify current rates at GOV.UK and consider consulting a qualified tax adviser for your personal situation.