Australians in Singapore: a foreign life policy and the ten-year rule

Many Australians work in Singapore, and many expect to go home. The Australian rules on leaving and returning are mechanical, which makes them easy to plan around and costly to ignore. This article sets out how residency, the departure and arrival CGT rules, the ten-year rule for life policies and the capital gains exemption for policies fit together for an Australian living in Singapore, with a worked example and an honest look at where a policy loses.

PPLI.com is a research publisher, not an insurer, broker or financial adviser, and is not licensed by the Monetary Authority of Singapore. Nothing here is an offer of insurance. To buy a policy, deal with an insurer or adviser licensed or exempted by MAS and check it on the MAS Financial Institutions Directory.

By Eldar Edmond Grady, CEO, PPLI.com. Research checked 27 September 2026. Australian law for the 2026-27 income year and Singapore law as at 27 September 2026, for an Australian individual who owns a life policy personally and moves between Australia and Singapore. The examples are hypothetical and state their assumptions.

The Singapore years

In Singapore the policy saves no tax. A resident individual is exempt on foreign-sourced income received in Singapore other than through a partnership (Income Tax Act 1947 s 13(7A)(b)), gains on investments are generally not taxable, and IRAS lists "Payouts from insurance policies as they are capital receipts" among the gains that are generally not taxed. There is no estate duty for deaths on or after 15 February 2008. Whatever a policy does for an Australian, it does on departure and on return.

Residency: four tests, and reform not yet law

The ATO applies four statutory tests: the resides test, the domicile test ("your domicile (the place that is your permanent home) is in Australia"), the 183-day test and the Commonwealth superannuation test. An Australian resident must declare "all income you've earned in Australia and overseas". Once you are a foreign resident, you do not return your foreign-source income, and Australian-source interest, dividends and royalties are generally subject to withholding as a final tax.

The domicile test is the one that catches Australians abroad, because an Australian domicile does not end with an overseas contract. A family that keeps its Sydney home available, leaves children at school in Melbourne and signs a two-year contract in Singapore should not assume non-residence. The government's proposed modernised residency rules have been consulted on for years but have not been legislated; professional commentary mentions 1 July 2027 as the earliest possible start. Plan under the current tests.

Leaving: CGT event I1

When you stop being an Australian resident, "you are taken to have disposed of CGT assets for their market value at the time you stopped being a resident, except for any taxable Australian property" (ATO). Taxable Australian property is mainly Australian real property and interests in land-rich entities, so shares, funds and other portfolio assets are in the net.

An individual "can choose to disregard all capital gains and losses when they stop being an Australian resident". The choice is all or nothing, and it has a cost: the assets are then treated as taxable Australian property until they are sold or you become resident again, so the gain that accrued before departure, and any gain while you are away, stays within Australian tax. For assets acquired after 8 May 2012, the 50% CGT discount is apportioned to the periods you were a resident.

Returning: deemed acquisition at market value

When you become an Australian resident, "you are taken to have acquired your CGT assets on the same day, at their market value" (ATO). That rule does not apply to assets acquired before 20 September 1985 or to taxable Australian property, including assets you elected to treat as taxable Australian property on departure. For a direct portfolio held without the election, the arrival rule is valuable: growth while you were in Singapore is outside Australian tax, and only growth after return is taxed.

The life policy rules: s 26AH and s 118-300

The ten-year rule

Section 26AH of the Income Tax Assessment Act 1936 taxes bonuses on an "eligible policy" when they are received during the first ten years. In PR 2023/21 the ATO set out the result for the policies it ruled on: the bonus portion of a withdrawal or surrender is assessable in full in years one to eight, two-thirds in year nine, one-third in year ten and not at all after ten years. Unrealised growth that stays inside the policy is not "received". Death benefits are not assessable.

The ten years can restart. If the premium in any year exceeds 125% of the premium in the previous year, "the 10-year eligible period in respect of the Policy is deemed ... to have commenced at the beginning of the year in which the Investments were increased" (PR 2023/21). A family that adds a large sum to an existing policy may reset the clock on the whole policy.

The capital gains exemption

Section 118-300(1) of the 1997 Act provides that "A capital gain or capital loss you make from a CGT event happening in relation to a CGT asset that is your interest in rights under ... a life insurance policy ... is disregarded in the situations set out in this table." For a policy of insurance on the life of an individual, the table covers the original owner of the policy and an entity that acquired its interest for no consideration. A buyer of a second-hand policy is not covered.

PR 2023/21 confirmed that the original owner, or someone who acquired the policy for no consideration, can disregard capital gains on surrender and death for the policies it covered. So for those policies, a foreign-issued investment-linked policy is inside s 118-300.

What PR 2023/21 is, and what it is not

PR 2023/21 is a product ruling. It deals with one insurer's investment-linked policies, issued by the insurer's Irish company and by its Singapore branch, and it binds the Commissioner only for people who take part in that product as described. It does not approve the product, and it says nothing about other insurers' policies, which have to be tested against s 26AH and s 118-300 on their own terms.

The ruling states several things it does not cover. It does not deal with policyholders who are not Australian residents, or with periods of non-residence. It does not rule on entitlement to the tax offset in s 160AAB of the 1936 Act, on the treatment of fees and charges, or on the capital gains position where a policy is assigned for consideration. And it was expressed to apply from 1 July 2023 to 30 June 2026. We found no replacement ruling as at 27 September 2026. The expiry does not change the law, but it ends the ruling's protection for new arrangements, and a family relying on it for a policy taken out after 30 June 2026 would be relying on its reasoning, not on its binding effect.

Departure, applied to a policy

Section 118-300 disregards a capital gain from a CGT event "happening in relation to" the owner's interest in the policy. CGT event I1 on departure is a CGT event that happens in relation to each of the individual's assets. On that reading, an original owner who leaves Australia with a policy has no departure gain on it, without needing the deferral election. The ATO has not ruled on the point in PR 2023/21, which excludes periods of non-residence, so it is our reading of the statute and not a ruling. It is the first question to put to an Australian adviser before leaving.

While you are in Singapore and not an Australian resident, a bonus received from the policy is foreign-source income of a foreign resident, which you do not return in Australia. On return, the policy is not affected by the deemed acquisition rule in any way that matters, because s 118-300 already disregards its gains. What does matter is where the policy stands on the s 26AH ten-year clock on the day you come back.

Worked example: a Singapore posting with a policy and a portfolio

Hypothetical. Sarah, an Australian resident, starts a policy on 1 September 2019 with a single premium of A$2,000,000 and makes no further premiums. The policy is assumed to be an eligible policy with the same features as the policies in PR 2023/21. She also owns a share portfolio that cost A$2,000,000 and is worth A$3,000,000 when she stops being resident on 1 July 2025. The policy is also worth A$3,000,000 on that date. She lives in Singapore until she becomes resident again on 1 July 2031. Assumptions: she was resident throughout her ownership of the shares before departure and held them more than 12 months; she is taxed at the top rate of 45% plus the 2% Medicare levy on any gain; she does not make the deferral election; the policy is worth A$3,600,000 in 2032, a growth of A$1,600,000; no withdrawals before then; no change in law.

On these assumptions the policy saves A$235,000 at departure, and it keeps the growth of the resident years before departure out of tax permanently, where a direct portfolio would have paid tax on its income each year and on its gains at departure. Against that sits the cost of the policy each year, which the example ignores and which a family should set against the saving with the tax drag calculator.

The cases that go against the policy

Change the dates. If Sarah had started the policy on 1 September 2025, just after leaving, and surrendered it in year seven after returning, the bonus would, on the words of s 26AH, be assessable in full at up to 47%, with no CGT discount, because the ten years had not run. A share portfolio sold at the same time would have had its cost base reset on her return and would have been taxed only on post-return growth, with the 50% discount. The policy would have been clearly worse.

And for an Australian who does not plan to return, the departure saving is the main benefit. After that, Singapore does not tax the portfolio either way, and the policy's charges run on for years with nothing to set against them.

The s 160AAB offset is a further uncertainty. PR 2023/21 does not rule on it, and whether any offset is available for a policy issued by an insurer outside Australia should be confirmed before a surrender inside ten years is planned.

Rates

For 2026-27 the resident rates are 15% from A$18,201, 30% from A$45,001, 37% from A$135,001 and 45% above A$190,000, and these rates "do not include the Medicare levy of 2%" (ATO). A bonus assessable under s 26AH, or a capital gain without the discount, can therefore be taxed at 47% at the top of the scale.

What Singapore adds

No tax. A Singapore resident individual pays no Singapore tax on the policy's growth, surrender or death benefit on the general IRAS position. On succession, Singapore's statutory trust and revocable nominations (Insurance Act 1966 ss 132 and 133, formerly ss 49L and 49M) are available only for a "relevant policy": issued by an insurer licensed in Singapore, governed by Singapore law, providing death benefits and insuring the life of the policy owner (s 131). A policy issued from Ireland, or by any insurer that is not licensed in Singapore, is not one. The Policy Owners' Protection Scheme covers only MAS-licensed direct life insurers' Singapore policies, up to S$500,000 of guaranteed death benefit and S$100,000 of guaranteed surrender value per life per insurer, and not investment-linked values that follow the underlying assets. See if a life insurer fails and trust and revocable nominations in Singapore.

What this means for a life policy

• The policy's work for an Australian is done at the edges: departure, and surrender after return.
• On our reading, s 118-300 keeps a policy out of CGT event I1 for its original owner. Confirm it before you leave.
• The s 26AH clock runs from the start of the policy and restarts on a premium increase of more than 25%. A policy started just before a posting that ends in year seven gives little.
• PR 2023/21 covers one product, excludes non-residence and ended on 30 June 2026. It is evidence of the ATO's approach, not cover for any other policy.
• A direct portfolio also gets a market-value reset on return. The policy's advantage is the departure charge and the untaxed growth while resident, less its costs.
• The residency reform is not law. Plan under the four current tests.

The general case for and against a policy for a Singapore resident is on tax efficiency in Singapore.

Questions to take to your adviser

1. Will I actually cease to be an Australian resident under the resides and domicile tests, given my ties in Australia?
2. Does s 118-300 disregard CGT event I1 on my policy, and should I still consider the deferral election for my other assets?
3. Is my policy an eligible policy under s 26AH, and when does its ten-year period end?
4. Have my premiums ever risen by more than 25% year on year, restarting the ten-year period?
5. Does PR 2023/21 say anything useful about my policy, which may be a different product or taken out after 30 June 2026?
6. Is a s 160AAB offset available on a surrender inside ten years, given who issued my policy?
7. Which assets should I sell before leaving, and which should I hold until after I return?
8. If I die while in Singapore, who receives the policy proceeds, and does the policy's beneficiary designation work in each country where my family has assets?

A Singapore resident who wants a product should deal with an insurer or adviser licensed or exempted by MAS and check it on the MAS Financial Institutions Directory. For families with other connections, see US citizens in Singapore, leaving the UK for Singapore, returning to India and mainland Chinese families, and the overview on private placement life insurance and Singapore.

Australians in Singapore with a life policy: questions

Do I stop paying Australian tax when I move to Singapore?

Once you are no longer an Australian resident under the resides, domicile, 183-day and Commonwealth superannuation tests, you do not return foreign-source income in Australia. Australian-source income stays taxable, and Australian interest, dividends and royalties are generally subject to final withholding tax.

What is CGT event I1?

When you stop being an Australian resident you are taken to have disposed of your CGT assets, other than taxable Australian property, at market value. You can choose to disregard those gains and losses instead, but the assets are then treated as taxable Australian property until you sell them or become resident again.

Does CGT event I1 apply to my life policy?

On our reading of s 118-300 of the Income Tax Assessment Act 1997, a capital gain from any CGT event happening in relation to the original owner's interest in a life policy is disregarded, which would include the departure event. The ATO has not ruled on this in PR 2023/21, which excludes periods of non-residence.

What is the ten-year rule?

Under s 26AH of the 1936 Act, bonuses received on an eligible policy are assessable in full in years one to eight, two-thirds in year nine, one-third in year ten and not at all after ten years. A premium more than 125% of the previous year's premium restarts the ten-year period.

What does PR 2023/21 cover?

One insurer's investment-linked policies issued from Ireland and from its Singapore branch. It confirmed eligible policy status under s 26AH and the s 118-300 capital gains exemption for the original owner. It does not cover non-residents or periods of non-residence, or the s 160AAB offset, and it applied from 1 July 2023 to 30 June 2026.

What happens to my assets when I move back to Australia?

You are taken to have acquired your CGT assets at market value on the day you become resident again, except pre-CGT assets and taxable Australian property, including assets you chose to treat as taxable Australian property on departure.

What is the top Australian tax rate?

For 2026-27, 45% on taxable income above A$190,000, plus the Medicare levy of 2%, so 47% at the top of the scale.

Are the new residency rules in force?

No. The proposed modernised residency tests have not been legislated, and professional commentary mentions 1 July 2027 as the earliest possible start. The four current tests still apply.

Sources and authorities

Australia: ATO PR 2023/21; Income Tax Assessment Act 1997 s 118-300; Income Tax Assessment Act 1936 s 26AH (as applied in PR 2023/21); ATO: how changing residency affects CGT; ATO: your tax residency; ATO: tax rates for Australian residents; Exfin on the residency reform. Singapore: Income Tax Act 1947 s 13; IRAS: gains that are generally not taxable; Estate Duty Act 1929 s 2A; Insurance Act 1966 ss 131 and 132; SDIC: coverage limits.

Research checked 27 September 2026 against the Australian legislation, ATO rulings and guidance linked above, and against Singapore primary sources (Singapore Statutes Online, IRAS, MAS and SDIC). The examples are hypothetical and were checked by script. How we research, check and correct pages is set out in our editorial standards.

PPLI.com is a research publisher and is not licensed by the Monetary Authority of Singapore. This is general information about Australian and Singapore law, not advice on any product and not an offer or invitation to enter into any insurance contract. Policies issued by insurers that are not licensed in Singapore are not covered by the Policy Owners' Protection Scheme or by Singapore statutory nominations.