Australian Financial Planning for Aliyah: Super, CGT, and the Treaty

What actually happens to your Australian finances when you make aliyah?

Two things most Australian olim never see coming: leaving Australian tax residency is itself a taxable event, CGT event I1 deems you to have sold your worldwide non-property assets at market value the day you cease to be a resident¹, and your superannuation does not move with you. It stays locked under Australian rules until preservation age, keeps being taxed by Australia, and can quietly become non-complying if you run a self-managed fund. A lifelong Israeli faces none of this; you arrive already carrying a super balance and a departing-resident CGT bill that the Israeli system knows nothing about.

This is the pillar guide for Australian aliyah finance. Australia is a growing, native-English source of olim with unusually complex departure mechanics, and three rulebooks run at once: the Australian Taxation Office (ATO), the מס הכנסה (Mas Hachnasa) (Israel Tax Authority), and, for dual US citizens, the IRS. They do not collapse into a single “the tax is X” answer, and the order in which you act matters.

How do you cease Australian tax residency, and when does it happen?

Australian tax residency is decided by a set of tests applied to your facts, not by a form you file. The ATO uses four statutory tests: the resides test (the ordinary-concepts test of where you actually live), the domicile test (you stay a resident if your domicile is in Australia unless your permanent place of abode is genuinely outside Australia), the 183-day test, and a superannuation test for certain government employees.² You become a foreign resident when the facts show you have left permanently, typically the day you depart with the intention of making Israel your home.

For an oleh this usually lands cleanly on the Australian-departure side: you sell or let the Australian home, move your family, and establish a permanent place of abode in Israel. But the domicile test is sticky, a vague “trial year” or keeping a fully available home in Australia can leave you an Australian resident longer than you assumed.² The date you cease residency is the trigger date for everything below, so pin it down with your adviser rather than guessing.

What is CGT event I1 and the “deemed disposal” on leaving?

When you cease to be an Australian resident, CGT event I1 treats you as having disposed of each of your CGT assets, at their market value on that day, for everything that is not“taxable Australian property” (non-TAP).¹ In plain terms: your Australian shares, managed funds, foreign shares and most other investments are deemed sold the moment you leave, and any built-up gain becomes taxable in your final Australian return. Real property in Australia (taxable Australian property) is excluded, it stays in the Australian net and is taxed when you actually sell it.¹

There is a relief valve. As an individual you can choose to disregard the gain or loss from CGT event I1. If you make that election, your non-TAP assets are instead treated as taxable Australian property until a later CGT event happens or you become a resident again, so the gain that built up while you were a resident is deferred, not forgiven, and stays exposed to Australian CGT on eventual sale.¹ You do not lodge a separate form to make the choice; the way you prepare your return is the evidence of it.¹

The election is a real decision, not a default: pay now and reset your cost base, or defer and keep filing with the ATO on those assets for years after you have left. Crucially, the Israeli 10-year exemption does not rescue you here, CGT event I1 is Australian domestic law that bites before Israel ever taxes you, exactly like the South African Section 9H exit tax.

Why does your superannuation stay locked and still get taxed by Australia?

Superannuation is preserved: you generally cannot withdraw it until your preservation age, which is 60 for everyone born after 30 June 1964, and benefits are typically tax-free in Australia once you are 60 and meet a condition of release.⁴ Moving to Israel does not unlock it early, leaving the country is not a condition of release for Australian citizens and permanent residents (only certain temporary residents can cash out on departure).⁴ Your super sits in Australia, keeps earning, and stays inside the Australian super-tax system regardless of where you live.

The sharpest trap is the self-managed super fund (SMSF). To stay a complying Australian super fund, an SMSF’s central management and controlmust be “ordinarily” in Australia, allowed to be temporarily absent for up to 2 years, but if it is permanently outside Australia the fund fails the test.³ A non-complying SMSF can be taxed at the top rate on its assets and income, a catastrophic outcome. If you run an SMSF and are making aliyah, the standard fix is to roll into an APRA-regulated retail or industry fund (whose trustee stays in Australia) before you go, or appoint an Australian-resident professional trustee, get advice before you leave, not after.³

What does the Australia-Israel treaty do, and how does it mesh with the 10-year exemption?

The Australia-Israel double-tax treaty, signed 28 March 2019, generally makes pensions — including superannuation income — taxable only in the country of residence of the recipient, with carve-outs for some lump sums and government-service pensions.⁷ Once you are an Israeli resident, that points your Australian super income to Israel. Israel then applies its own rules, including the new-immigrant 10-year exemption on foreign-source income, so in your early years the tax on that super income is often nil on both sides.⁹

Keep the mechanisms separate. The treaty decides which country may tax; the 10-year exemption decides whether Israel actually does. New olim get a 10-year Israeli exemption on foreign-source income, passive and active, including pensions, interest, dividends and foreign capital gains.⁹ And note the 2026 reform: from 1 January 2026^°, the exemption became report-but-still-tax-exempt. Foreign income stays exempt from Israeli tax, but olim who arrive in 2026 or later must now report that foreign income and assets to the Israel Tax Authority.⁹ So expect to disclose your Australian super, shares and any מטבע חוץ (Matbea Chutz) accounts to מס הכנסה (Mas Hachnasa) even while no Israeli tax is due.

How are franking credits and dividends taxed once you are a non-resident?

It flips once you leave. For an Australian non-resident, the franked portion of a dividend is not subject to Australian income or withholding tax, but you also get no franking (imputation) credit to offset other tax.⁶ The unfranked portion is hit with dividend withholding tax at 30%, reduced to 15% for residents of treaty countries, and Australia’s treaty network, including the Israel treaty, caps the source rate accordingly.⁶⁷ That withholding is a final tax: no Australian return needed on the dividend, no further Australian liability.⁶

The practical sting for olim is the franking credit. While you were a resident, fully franked dividends often came with refundable credits; once you are a non-resident those credits simply vanish, you keep the franked dividend tax-free but lose the refund you may have relied on. Israel, during your 10-year exemption, will not tax these either, but after the exemption ends Israel taxes your worldwide dividends and gives relief only for Australian tax actually paid.⁹

What is Division 296, and does it reach you after aliyah?

Division 296 is a new Australian tax of 15% on the earnings attributable to the portion of your total super balance above 3 million AUD, applying from 1 July 2026; a further 10% applies to balances above 10 million AUD.⁵ It is assessed on the individual, on top of the ordinary 15% fund tax, and it follows your super, not your residence. So if you leave a large super balance behind in Australia when you make aliyah, Division 296 can still reach the growth on it, even though you live in Israel and the income would otherwise be inside your 10-year exemption window.

This is one of the few places where staying invested in Australian super after aliyah carries a new Australian cost rather than a sheltered one. It does not change the preservation rules, you still cannot pull the money out before 60, it simply taxes the earnings on the excess above 3 million AUD.⁵ For most olim the balance sits well under the threshold and Division 296 is irrelevant; for high-balance retirees it is a reason to model the numbers with a cross-border adviser before deciding whether to leave super in Australia.

How do you move AUD to Israel, and what gets reported to AUSTRAC?

Any international transfer of funds into or out of Australia is reportable to AUSTRAC by the bank or remitter, an international funds transfer instruction (IFTI) is filed regardless of the amount, not just over a threshold.⁸ Separately, a physical-cash transaction of A$10,000 or more (or foreign-currency equivalent) triggers a threshold transaction report.⁸ You do not file these yourself; the institution does. But it means a large super lump sum or house-sale proceeds wired to your Israeli account will be visible to the authorities on both sides, keep clean records of the source of funds so the transfer is not mistaken for unexplained wealth.

On the Israeli end, your new bank will ask for documentation on the origin of large incoming sums as part of anti-money-laundering checks. Pairing the AUSTRAC trail with proof of the underlying sale or withdrawal, and watching the AUD/ILS rate and transfer fees, which can dwarf any tax saving, is the unglamorous but decisive part of the move.

Leaving Australia for Israel sets off two events most olim never see coming. First, ceasing Australian tax residency is itself taxable: CGT event I1 deems you to have sold your worldwide non-property ("non-TAP") assets, such as shares and managed funds, at market value on the day you leave, so an unrealised gain can become taxable without any actual sale. You can elect to disregard that gain and instead treat those assets as taxable Australian property, deferring the CGT to when you eventually sell. Second, your superannuation does not move with you: it stays locked in Australia until preservation age (60 for anyone born after 30 June 1964), keeps being taxed by Australia, and a self-managed super fund (SMSF) can become non-complying once its central management and control is permanently outside Australia. The Australia-Israel double-tax treaty signed 28 March 2019 generally gives super and pension taxing rights to your country of residence, Israel, which then meshes with Israel's 10-year new-immigrant exemption so your early-years super income is usually untaxed on both sides (though reportable for olim arriving in 2026 or later). Watch two extras: Division 296 adds a 15% tax from 1 July 2026 on earnings attributable to super balances above 3 million AUD, and for Australian-American dual olim, super and Australian managed funds are PFICs that the IRS keeps taxing via Form 8621 regardless of the treaty. This is general educational information, not advice; consult a cross-border professional who understands both the ATO and the Israel Tax Authority before acting.