The CGT 6-Year Rule: Keep Your Main Residence Exemption When You Move Out
Moved out and renting your old home? The capital gains tax 6-year rule could save you thousands. How it works, who qualifies, and the traps to avoid.
By Timothy Hirou GaschereauPublished 10 min read
Try it yourself
You bought a place, you lived in it, and then life happened. A job offer in another city. A relationship change. A stint overseas. Whatever the reason, you moved out and started renting your home to someone else. Now you are wondering: if I sell, am I up for a massive CGT bill?
Maybe not. The capital gains tax 6-year rule is one of the most valuable concessions in Australian tax law, and plenty of people have never heard of it. It lets you keep your main residence exemption alive for up to six years after you move out, even while you are collecting rent. Done right, it can save you tens of thousands of dollars. Here is exactly how it works. This is general information only, not tax advice.
🎯 The essential: Move out and rent your former home and you can keep treating it as your main residence for CGT for up to 6 years. Sell inside that window without nominating another main residence and you could pay zero CGT. The clock only ticks while the place is rented: leave it vacant and there is no time limit at all. You can only have one main residence at a time. And it is a choice you have to apply in your return, not an automatic freebie.
What the 6-year rule actually is
The 6-year rule (formally the “absence” rule) lets you treat a former home as your main residence for CGT purposes for up to 6 years after you move out, provided you rent it out during that time. In plain English: if you sell within that 6-year window, you may pay no CGT at all, as if you had never left.
If you only rented it for part of the period, you get a partial exemption instead. The maths for that is in the examples below. One important point: this is a choice, not an automatic right. It needs to be applied correctly when you lodge, and a registered tax agent can help you get it right.
Who qualifies
Not everyone can use this rule. The eligibility checklist:
- You must have actually lived there. The property has to have been your genuine main residence before you moved out. Owning it is not enough.
- You must be an individual. Companies and trusts cannot use the main residence exemption.
- The property must be in Australia.
- You must not nominate another property as your main residence during the same period. This is the big one, covered in detail below.
- The 6-year cap applies only when the property is rented out. Leave it vacant with no rental income and the absence period is unlimited.
If you have never owned before, it is worth understanding the exemption from the ground up. Our guide to capital gains tax on property covers the main residence exemption and how CGT works on a home more broadly.
How the 6-year clock works (and resets)
The clock starts when you begin renting the property out, not simply when you move out. If you move out in January and do not find a tenant until March, the clock starts in March.
Here is the good news: the clock resets if you move back in. If you move back and genuinely re-establish the property as your main residence, the 6-year period starts fresh the next time you move out and rent again. You can do this more than once. Each rental period gets its own 6-year window, and vacant gaps between tenants do not eat into your allowance.
Vacant vs rented: the key difference
This is one of the most misunderstood parts of the rule, so let us be direct about it.
| Situation | Time limit on your absence |
|---|---|
| Property rented out (earning income) | 6-year cap applies |
| Property left vacant (no rental income) | No cap, unlimited absence |
So if you leave the property empty, you can be away for 10, 15, even 20 years and still potentially claim the full exemption when you sell. Rent it out, even for a single day, and the 6-year clock starts for that rental period.
The catch with leaving it vacant: you cannot claim rental deductions like interest, rates, insurance and depreciation, because there is no rental income to deduct against. So there is a trade-off between an unlimited exemption and no deductions. Which one wins depends on your numbers, and it is a great question for a registered tax agent.
Worked examples with numbers
Example 1: full exemption within 6 years. Priya bought her Sydney apartment in 2015 for $600,000. She lived there until 2019, then moved overseas for work and rented it out. She sold in 2024 for $900,000. Rental period: 5 years, inside the 6-year window. She did not nominate another main residence. CGT payable? Zero. The full main residence exemption applies to the whole $300,000 gain.
Example 2: partial exemption beyond 6 years. Marcus bought his Melbourne home in 2010 for $500,000, lived there until 2014, then rented it out and sold in 2025 for $1,000,000. He owned it 15 years: 4 years lived in, 11 years rented. The 6-year rule covers 6 of those 11 rental years.
| Step | Amount |
|---|---|
| Exempt period (4 lived in + 6 covered) | 10 years |
| Total ownership | 15 years |
| Taxable fraction (5 / 15) | 33.3% |
| Total capital gain | $500,000 |
| Taxable portion (x 33.3%) | $166,500 |
| After 50% CGT discount | $83,250 |
Marcus adds $83,250 to his assessable income for 2025-26 and pays tax on it at his marginal rate. Not nothing, but far better than paying CGT on the full $500,000 gain. The formula: taxable gain equals total gain times (non-exempt days divided by total ownership days), then halved if you held for more than 12 months.
Example 3: the reset in action. Sophie rented her Brisbane home from 2016 to 2019 (3 years used), moved back in for two years, genuinely re-establishing it as her main residence, then moved out and rented again from 2021. Because she moved back in, the clock reset completely. Her second rental period gets a fresh 6 years, so she can rent until 2027 and still sell with a full exemption.
The “one main residence at a time” catch
This is the biggest trap people fall into. You move out of your Sydney home, rent it, then buy a new place in Brisbane and move in. You now own two properties. You might assume Sydney is still covered by the 6-year rule. It might be, but only if you do not nominate Brisbane as your main residence for the same period.
If you nominate Brisbane (which you would usually want to, since you live there), Sydney stops being covered from that point, and CGT applies to Sydney for the period it was not your nominated main residence. There is a narrow exception: if you are genuinely moving between homes, you can treat both as your main residence for up to 6 months. That is a bridging provision for settlement timing, not a long-term strategy. If this is your situation, rentvesting and how you structure ownership are worth getting advice on early.
Common mistakes
- Assuming it applies automatically. It does not. You have to apply it in your return and not have nominated another main residence for the same period.
- Thinking the clock starts when you move out. It starts when rental income begins. Vacant months before your first tenant do not count against the 6 years.
- Not keeping records of key dates. The ATO can ask you to prove when you moved in, moved out and started renting. No proof, no claim.
- Thinking it applies to an investment property you never lived in. It does not. The place must have been your genuine main residence first.
- Buying a new home and assuming the old one stays exempt too. The one-main-residence rule usually forces a choice. The 6-month bridging window is narrow.
If you are also claiming deductions while the place is rented, our guide to investment property tax deductions and the article on tax on rental income are the natural next reads.
Records you must keep
Good records are what stands between you and an audit going badly. Keep:
- The dates you first moved in, moved out, started renting, and moved back in
- All rental income and expenses, plus a copy of each lease
- The purchase price and acquisition costs (stamp duty, conveyancing, inspections)
- The sale price and disposal costs (agent commission, conveyancing)
- Any capital improvements, which increase your cost base
The ATO requires you to keep CGT records for at least 5 years after lodging the relevant return. For property, that often means keeping them for decades. A folder in the cloud costs nothing. An audit without records costs a lot. The ATO's CGT property exemption tool can help you work through the numbers, but for anything complex, use a registered tax agent.
Frequently asked questions
Does the CGT 6-year rule apply automatically?
No. The 6-year rule is a choice, not an automatic concession. You need to apply it correctly when you lodge your tax return, and you must meet all the eligibility conditions, including not nominating another property as your main residence during the same period. If you are unsure, speak with a registered tax agent before you sell.
What happens if I rent my home for more than 6 years?
You get a partial exemption. The 6-year rule covers the first 6 years of the rental period, plus any time you actually lived there. The remaining years are subject to CGT. You calculate the taxable portion using the day-count formula, then apply the 50% CGT discount if you held the property for more than 12 months.
Can I use the 6-year rule if I leave my home vacant (not rented)?
Yes, and the rules are even more generous for vacant properties. If you move out and leave the property empty with no rental income, there is no time limit on your absence. You can treat it as your main residence indefinitely. The 6-year cap only applies when the property is used to produce income, such as rent.
Can I use the 6-year rule and claim rental deductions at the same time?
Yes. Claiming rental deductions like mortgage interest, rates, insurance and depreciation during the absence period does not disqualify you from the 6-year rule. You are entitled to both. There are rules around cost base adjustments that can affect your CGT calculation, so make sure your tax agent is across this when you eventually sell.
What if I buy a new home while my old home is rented out?
If you move into the new home and nominate it as your main residence, the 6-year rule on your old home generally stops applying from that point. You can treat both as your main residence for up to 6 months if you are genuinely in transition between properties, but this is a narrow exception. If you hold both long-term, you will need to nominate one for each period.
Does the 6-year rule apply to investment properties I never lived in?
No. The main residence exemption, including the 6-year absence rule, only applies to properties that were genuinely your main residence at some point. If you bought a property and rented it out from day one, it is an investment property and the full CGT rules apply from the date of purchase.
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Sources
This article is general information only, not tax or financial advice. CGT rules, the main residence exemption and the 50% discount are set by the ATO and can change. Check the ATO or a registered tax agent for guidance specific to your situation.
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General information only. This article is educational and does not constitute personal financial advice. It does not account for your circumstances. Consider your own situation and seek advice from a licensed adviser before acting. Read our full disclaimer.
Timothy Hirou Gaschereau
Founder of Snowball Invest, not a financial adviser.
I write about what I'm learning myself, because nobody ever taught us how to take control of our own money. It's a skill, not a mystery, and it's never too late to learn it. The best day to start was yesterday, the second best is today.
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