Cost Base for New Residents of Australia: The Market Value Reset on Arrival

Published 3 November 2026 by Steffan Kharmaaiarvi, founder

The cost base for a new resident of Australia is usually not what the client paid. When a client becomes an Australian resident, the shares and funds they already own are treated as acquired that day at their market value. Gains made before arrival fall outside Australian CGT, but the 12-month clock for the discount starts again, and the value on arrival day has to be recorded, because nobody will be able to reconstruct it years later. This note sets out the rule in section 855-45 of the Income Tax Assessment Act 1997, its exceptions, what to record, an illustrative worked example and what Borderfolio for Advisors does with it. It is decision support for a professional conversation, not tax advice.

The rule: market value on the day residence starts

Section 855-45 applies to each CGT asset an individual or company owned just before becoming an Australian resident. Two things follow:

• Cost. The first element of the asset's cost base and reduced cost base is its market value at the time the client became resident (s855-45(2)).
• Date. The CGT rules in Parts 3-1 and 3-3 apply as if the client had acquired the asset at that time (s855-45(3)).

The ATO calls this a ‘deemed acquisition’ and gives the example of a client who becomes resident on 15 May 2026: the cost of his shares is their market value on 15 May 2026. The second limb is easy to miss: because the asset is treated as acquired on arrival day, the 12 months a client must own an asset before a sale to claim the 50% CGT discount run from arrival day, not from the original purchase.

What the reset does not cover

• Taxable Australian property. Australian real estate and other taxable Australian property keep their ordinary cost base, because they were already within Australian tax (s855-45(1)(a)).
• Pre-CGT assets acquired before 20 September 1985 are outside it (s855-45(1)(b)).
• Temporary residents. The ATO states that the deemed acquisition does not apply when the client is also a temporary resident after becoming resident; s855-45 is subject to s768-950. A temporary resident is taxed on capital gains like a foreign resident, only on taxable Australian property. If they later stop being a temporary resident and remain resident, they are taken to acquire their non-taxable-Australian-property assets at market value at that later time.
• Employee share scheme interests have their own rules (s855-45(4)).

Temporary residence is defined by visa and by whether the client and their spouse are Australian residents within the meaning of the Social Security Act 1991. For a client arriving on a temporary visa, the relevant reset date may be the day permanent residence is granted, not the day they landed. The ATO's example of a client on a temporary visa who became a permanent resident on 15 March 2025 sets the cost base at market value on that date.

Converting the value into Australian dollars

Section 960-50 requires amounts in a foreign currency, including a value, to be translated into Australian currency, and elements are translated before the amount they make up is calculated. For a reset cost base, that means each holding's market value on arrival day, in its trading currency, converted to Australian dollars. Record the rate used and its source with the value.

What to record on arrival

• The date residence started, and whether the client was a temporary resident from that date.
• For each holding: shares or units held, the closing price on that date in its own currency, and the broker statement or price source it came from.
• The exchange rate applied and its source.
• The original purchase history too. The client's former country may still tax a later sale, or the client may move on to a country without a reset, and both use the original cost.
• Which holdings, if any, are taxable Australian property or pre-CGT and keep their ordinary cost base.

A year-end statement is not enough on its own unless arrival day is the statement date. Ask the client for a valuation as at arrival day while the broker can still produce one.

An illustrative worked example

The figures, including the exchange rates, are invented to show the arithmetic. A client moves from London and becomes an Australian resident, not a temporary resident, on 1 February 2026. They own 400 units of a global equity ETF bought in 2019 for £24,000 (£60 a unit).

• Without the reset. Taking the 2019 cost at, say, A$1.85 per £1 gives A$44,400 and a gain of 97,000 − 44,400 = A$52,600. The reset keeps the A$41,400 of growth before arrival outside Australian CGT.
• Sold too soon. If the client sold the same units on 1 December 2026, the gain would be measured from A$85,800, but the units would count as owned for less than 12 months, so no discount applies, even though the client has held them since 2019.
• No value recorded. Without the arrival value there is no defensible cost base at all, only the original cost, which overstates the Australian gain.

What Borderfolio shows

• Value on arrival. For a client resident in Australia with an arrival date on the profile, the Cross-Border tab lists each holding owned on that date per the transaction history. You enter the shares held and their value from the statement, in any currency; Borderfolio converts it at that day's reference rate and applies it for that residence and that arrival date only.
• The discount clock restarts. Parcels held on arrival take the arrival date as their acquisition date, so the 12-month test runs from it.
• Where it is used. The reset cost feeds the gain in a proposed switch (Scenarios) and the deemed disposal if the client later leaves Australia; see CGT when a client leaves Australia. For a US person, or a planned move to a country without a reset, a finding shows the two cost bases side by side.
• Unknown stays unknown. A holding without an entered value reads ‘value on arrival’ and no total is given. The value is never estimated from a price feed.

Not modelled: temporary residents (the reset is applied from the arrival date on the profile, so enter the date permanent residence began instead), pre-CGT assets and taxable Australian property (keep them out of the arrival entries), employee share schemes, and the parcels a client identifies on sale (first in, first out is assumed). Read more in the cross-border documentation and, for moves, relocation.

Sources: ITAA 1997 s855-45, ATO, how changing residency affects CGT, ATO, CGT discount, ITAA 1997 s960-50.

Frequently asked questions

What is the cost base of shares owned before moving to Australia?

Their market value on the day the client became an Australian resident (s855-45 ITAA 1997). The ATO calls this a deemed acquisition. It does not apply to taxable Australian property or to assets acquired before 20 September 1985.

Does the 12-month CGT discount period restart on arrival?

Yes. Section 855-45(3) applies the CGT rules as if the asset was acquired when the client became resident, so the asset must be owned for 12 months from that date before a sale qualifies for the 50% discount.

Does the reset apply to temporary residents?

Not while they are temporary residents. When a temporary resident stops being one and remains an Australian resident, assets that are not taxable Australian property are taken to be acquired at market value at that time.

What should an adviser record when a client arrives in Australia?

The date residence started and whether the client was a temporary resident, the units and market value of each holding on that date with the source, the exchange rate used, and the original purchase history for other countries' rules.

Not tax advice. This article is general information for financial advisers, current as at 3 November 2026. Confirm each client's position with a registered tax agent or lawyer before acting.