I am a former Australian tax resident who acquired some shares/ETFs before I departed Australia and became UK resident.
On departing Australia I elected to defer taxation on the capital gains that would arise due to "deemed disposal" on ceasing to be a resident of Australia (see https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/foreign-residents-and-capital-gains-tax/how-changing-residency-affects-cgt#IfyoustopbeinganAustralianresident).
Article 13 Section 5 of the Australia/UK double taxation agreement (see https://www.austlii.edu.au/au/other/dfat/treaties/2003/22.html) seems to say that in this case, only the UK taxes the capital gains when I sell these assets.
The UK is about to introduce a new "Foreign Income and Gains" (FIG) tax regime available to individuals in their first 4 years of tax residence after a period of 10 years of non-residence (see https://www.legislation.gov.uk/ukpga/2025/8/enacted#p03131). This regime allows tax relief for foreign capital gains. Notably there are other UK tax consequences for using this tax regime, but they do not include paying tax on these foreign capital gains (even when received or remitted).
Article 23 of the AU/UK DTA seeks to limit relief when the "other state" does not tax income or gains due to it not being "remitted to or received", or due to "being a temporary resident of the other State within the meaning of the applicable tax laws of that other State". Neither of these would seem to apply to the new FIG regime as it applies independently of remitting or receiving the income/gains and considers only the length of residence and non-residence to date rather than the ability or intention to continue to be resident (ie. the temporariness or permanence of this residence is not a factor).
So it would seem that if I sold shares/ETFs in the upcoming UK tax year:
* Australia would not tax the capital gains due to Article 13 Section 5 of the DTA
* I could elect to use the UK FIG tax regime (as I would still be in my first 4 years of UK tax residence) and receive tax relief for these gains, thereby effectively avoiding capital gains tax on them (though incurring other UK tax consequences).
* Article 23 of the DTA seems intended to address cases *like* this, but as written would not seem to apply.
Have I read the relevant rules correctly? I'm obviously not a tax lawyer, but his seems like a potentially lucrative loophole if so.
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