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Main Residence Exemption & the 6-Year Rule (CGT)

Q: How long do I have to live in a home before it counts as my main residence?

There is no fixed minimum number of months. It is a question of fact: the ATO looks at where your belongings, mail, electoral enrolment and licence are, whether utilities are connected, and how long you actually lived there. Intention alone is not enough; you have to genuinely occupy it.

Q: I have moved overseas. Can I still claim my home is exempt?

Usually no. If you are a foreign resident for tax purposes on the day you sign the sale contract, you generally lose the main residence exemption entirely, with only narrow life-event exceptions. The timing of the sale relative to your residency matters enormously.

Published June 25, 2026 Updated June 25, 2026 by Eduyush Team

CGT and your home: every way you can keep the exemption (and how to lose it)

Your home is generally exempt from capital gains tax — but the exemption is fragile. The moment you rent it out, move between homes, leave the country, or move in a little too late, the rules shift. This guide maps every common path a home takes, shows you where the tax-free line sits with simple timelines, and gives you a checklist so you don't surrender an exemption you were entitled to.

General information only. This is not personal tax advice. How these rules apply turns on exact dates, valuations and your residency status. Speak to a registered tax agent before you sell.

The golden rule

Your main residence is fully exempt from CGT if it was your home for the whole time you owned it, you didn't use it to earn income, the land is 2 hectares or less, and you weren't a foreign resident when you sold. Miss any one of those and you move from a full exemption to a partial one — or, in the foreign-resident case, to none at all. One more catch most people forget: you can generally only have one main residence at a time, so you can't shelter two homes for the same period.

Exempt — you lived there Exempt by choice — absence rule Taxable

Partial exemption

1. You rent it first, then move in

Income first, then home

Taxable

Exempt

Rented 2 yrs

Lived in 8 yrs → sold

If a property earns income before you ever live in it, you can't use the absence rule — you never established it as your home first. You get a partial exemption only, apportioned by days:

Taxable gain = total gain × non-main-residence days ÷ total ownership days

Worked exampleMaya buys a unit, rents it for 2 years, then lives in it for 8 years before selling for a $200,000 gain. Non-home days are roughly 730 of 3,650. Taxable gain = $200,000 × 730 ÷ 3,650 = $40,000. After the 50% discount, $20,000 is added to her assessable income.

"Renting before you live in it is a tax stain that never fully washes out — you can clean most of the gain, but those early rental days stay on the bill."

Full exemption possible

2. You live in it first, then move out and rent it

The six-year absence rule

Exempt

Exempt by choice

Lived in 3 yrs

Rented ≤6 yrs → sold

Once a home has genuinely been your main residence, you can move out, rent it, and still treat it as your main residence for up to six years — so the whole gain can stay exempt. If you leave it empty (no income) you can treat it as your home indefinitely. The catch: you can't claim the exemption on another home for the same period, so you're choosing which home to shelter.

Worked exampleSam lives in his home for 3 years, is posted interstate, rents it out for 5 years, then sells. Because he established it as his home first and the rental run is 6 years or less, he can treat it as his main residence the entire time — the capital gain is fully exempt. Tax payable: nil.

Watch-out: the six years runs per absence. Move back in, re-establish the home, then move out again and a fresh six-year clock starts. But you can only ever shelter one home at a time.

"The six-year rule is a tax-free leash on your old home — wander as far as you like, but only one home can be on the leash at once."

Partial exemption

3. You rent it out for more than six years

The six-year leash runs out

Exempt

Exempt — 6 yrs

Taxable

Lived in

First 6 rental yrs

Years 7+

Rent the home out for longer than six years in a single absence and only the first six years stay sheltered. Everything past that is taxed on a days basis — the gain is apportioned across the period beyond six years.

"After six years the leash snaps. From day one of year seven, the meter is running again."

Full exemption possible

4. You buy a new home before selling the old one

The six-month changeover overlap

Old home — exempt

Both exempt

You live here

≤6 mth overlap

Moving house is rarely instant, so the law lets both homes be exempt for up to six months while you change over — provided the old home was your main residence for at least 3 of the prior 12 months, wasn't earning income in that window, and the new one becomes your home. Take longer than six months and the excess overlap becomes taxable on one of the properties.

"You get a six-month grace lane to own two homes tax-free. Drift past it and one of them starts paying rent to the taxman."

Cost-base reset

5. A home that first earns income gets a fresh cost base

The "home first used to produce income" rule

This one is a hidden gift. If you live in a home first and only later rent it out for the first time, the law treats you as having bought it at its market value on the day it first earned income. That resets your cost base — often dramatically higher than what you originally paid — so the eventual taxable gain is calculated from that later, higher value, not your old purchase price. It only happens once, the first time the home earns income.

Watch-out: the reset is automatic, but the valuation isn't. If you don't get a market valuation on the day it first earns income, you're left guessing years later — usually to your cost.

"The day your home first earns a dollar, the tax clock quietly hands it a brand-new price tag. Photograph that price tag — get a valuation — or you'll never prove what it said."

The cliff

6. You sell while a foreign resident

Residency at the contract date decides everything

Whole gain taxable — no exemption

Even the years you lived there as a resident

This is the harshest rule in the whole area, because it's a cliff, not a slope. If you're a foreign resident for tax purposes on the day you sign the sale contract, you generally get no main residence exemption at all — not even apportioned for the years you lived there as an Australian resident. The exceptions are narrow: certain life events (a terminal illness, or the death of a spouse or child under 18, or a relationship-breakdown distribution) within six years of becoming a non-resident.

And a second hit — withholding: from 1 January 2025, foreign resident capital gains withholding is 15% with no price threshold, so it applies to every property sale. Even an Australian resident selling their own home must give the buyer an ATO clearance certificate before settlement — without it, the buyer is required to withhold 15% of the price and remit it to the ATO, and you chase it back through your return.

"Residency on contract day is a switch, not a dial. Flip it the wrong way and the entire exemption vanishes — including the years you genuinely lived there."

The checklist: don't lose an exemption you've earned

Move in as soon as practicable after settlement — renting it out first permanently taxes the days before you move in.
Only ever shelter one home per period — you can't exempt two at once (bar the six-month changeover and the spouse 50% rule).
Use the six-year rule deliberately and track each absence separately — moving back in resets the clock.
Keep an absent home empty (no income) if you want the exemption to run indefinitely.
Get a market valuation the day a former home first earns income — it becomes your new cost base.
Keep ownership-cost records for the years you lived there — those costs lift your cost base; rented-period costs were already deducted and can't.
If you and your spouse have different homes, watch the "more than 50% ownership" flag — it changes who's exempt.
Don't let a home changeover drag past six months.
Get an ATO clearance certificate before settlement — even on your own home — or lose 15% of the price to withholding.
Check your residency status at the contract date before you sell — becoming a foreign resident can wipe the exemption entirely.

Quick reference

Your situation	Exemption	The key lever
Lived there the whole time, never income	Full	2 ha cap; resident at sale
Rented first, then moved in	Partial (days basis)	Can't use the absence rule
Lived first, then rented ≤6 years	Full (by choice)	Only one home sheltered at a time
Lived first, then rented >6 years	Partial	Six-year clock per absence
Left empty during absence	Full (indefinite)	Must stay non-income-producing
Changing homes	Both exempt ≤6 months	Old home was home 3 of prior 12 months
Home first rented after living there	Cost base resets to market value	Get the valuation that day
Foreign resident at contract date	None (rare exceptions)	Time the sale while still a resident

Frequently asked questions

How long do I have to live in a home before it counts as my main residence?

There's no fixed minimum number of months. It's a question of fact — the ATO looks at things like where your belongings, mail, electoral enrolment and licence are, whether utilities are connected, and how long you actually lived there. Intention alone isn't enough; you have to genuinely occupy it.

Can I rent out my home and still pay no CGT?

Yes, if you lived in it first. Under the six-year absence rule you can rent a former home for up to six years and still treat it as your main residence, so the gain stays exempt — as long as you don't claim the exemption on another home for that period.

What happens if I rent it out for more than six years?

Only the first six years of that absence stay exempt. The gain attributable to the period beyond six years is taxed, apportioned on a days basis.

I work from home occasionally — does that cost me the exemption?

Generally no. Occasionally working from home is treated differently to running a business from home. If you're not entitled to claim occupancy expenses like interest and rates, it doesn't affect your main residence exemption.

I've moved overseas. Can I still claim my home is exempt?

Usually no. If you're a foreign resident for tax purposes on the day you sign the sale contract, you generally lose the main residence exemption entirely, with only narrow life-event exceptions. Where possible, the timing of the sale relative to your residency matters enormously.

Do I need a clearance certificate to sell my own home?

Yes. From 1 January 2025, withholding applies to all property sales with no price threshold. As an Australian resident you give the buyer an ATO clearance certificate before settlement; without it, 15% of the sale price is withheld and remitted to the ATO, and you recover it through your tax return.

Reminder: general information, not personal advice. The right answer depends on your dates, valuations and residency. A registered tax agent can apply these rules to your circumstances before you sell.

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Main Residence Exemption & the 6-Year Rule (CGT)