Capital Gains Tax 6-Year Absence Rule (Australia)

The 6-year absence rule is one of the most significant — and commonly misunderstood — CGT provisions in Australian tax law. It allows property owners who move out of their home and rent it to continue treating it as their main residence for CGT purposes for up to 6 years, potentially making the entire capital gain exempt.

This guide explains exactly how the 6-year CGT absence rule works, the conditions you must meet, how the clock operates, and the traps that catch people out.

Estimates only. General information, not tax or financial advice.

What is the 6-year absence rule?

The 6-year absence rule (formally part of the main residence exemption under Subdivision 118-B of the Income Tax Assessment Act 1997) allows you to continue treating a property as your main residence for CGT purposes for up to 6 years after you move out, even if you rent it to tenants during that time.

In plain terms: if you lived in a property as your home, moved out, and then rented it, you can choose to keep the main residence CGT exemption for up to 6 years. When you sell within that window, the entire capital gain may be exempt from CGT — as if you had never left.

Without this rule, the moment you start earning rental income from your former home, the property becomes an investment asset, and any capital gain from that point forward would normally be taxable.

Source: ATO — Treating former home as main residence, retrieved 17 Feb 2026.

Key conditions for the 6-year rule

To use the 6-year absence rule, you must meet all of the following conditions:

1. The property was your main residence before you moved out. You must have actually lived in it as your home. A property you purchased solely as an investment does not qualify — it was never your main residence.

2. You do not treat any other dwelling as your main residence for the same period. This is the one-at-a-time rule. You can only have one main residence for CGT purposes at any given time. If you buy a new home and nominate it as your main residence, the 6-year rule stops applying to the former home for the overlapping period.

3. You make the election in your tax return. The 6-year rule is not automatic. You choose to apply it when you lodge the return for the year you sell the property. If you do not make the election, the default position may result in a taxable gain.

4. The property sits on no more than 2 hectares of land. The main residence exemption (and therefore the 6-year rule) generally applies only to a dwelling and its adjacent land up to 2 hectares.

Source: ATO — Your main residence (home), retrieved 17 Feb 2026.

60-second eligibility checklist

Use this checklist before you assume your sale is fully exempt:

• [ ] You genuinely lived in the property first (it was your main residence, not an investment-only purchase).
• [ ] You know the exact move-out date and the date the property first became income-producing.
• [ ] Your total rented period in this absence is 6 years or less (or you understand a partial exemption will apply).
• [ ] You have not nominated another dwelling as your main residence for the same period (except any valid overlap rule period).
• [ ] You can evidence market value when it first became income-producing (valuation or strong comparable sales).
• [ ] You plan to make the election in the tax return for the year of sale.

If you cannot tick all six, run both scenarios (best-case and conservative-case) in the calculator before deciding to hold or sell.

Rented vs vacant: the critical distinction

This is the single most important thing to understand about the 6-year rule, and the point most people get wrong:

• If the property is rented out (income-producing): the exemption lasts for up to 6 years after you move out.
• If the property is NOT income-producing (left vacant): the exemption has no time limit. It continues indefinitely.

This means if you move out and leave your home empty — you do not rent it, you do not use it for business — the main residence exemption can continue for as long as you own the property, with no 6-year cap. The 6-year limit only applies when the property is producing income.

Example: Bill (vacant, unlimited exemption)

Bill buys a house and lives in it for 3 years. He then moves interstate for work and leaves the house vacant. He does not rent it out. After 12 years, he sells.

Result: Because the property was never income-producing during the absence, Bill can claim the full main residence exemption. The entire capital gain may be exempt from CGT — even though he was absent for 12 years.

The catch: Leaving the property vacant means forgoing rental income. Over 12 years, the lost rent could easily exceed any CGT you would have paid. The decision to rent or leave vacant should weigh the rental income against the potential CGT liability.

Source: ATO — Treating former home as main residence, retrieved 17 Feb 2026.

How the 6-year clock works

The 6-year clock starts on the date you move out of the property and it becomes income-producing (that is, when you first rent it or use it for business). Several important rules govern how the clock operates.

The clock resets on re-occupation

If you move back into the property and genuinely re-establish it as your main residence, and then move out again, a fresh 6-year clock starts for the new absence period. Each absence gets its own 6-year allocation.

Example: Jez (clock resets with re-occupation)

Jez buys a home and lives in it. He then moves out and rents it for 5 years (within the 6-year window). He moves back in and lives there for 2 years. He then moves out again and rents it for another 4 years before selling.

Result: The first absence (5 years) is within the 6-year limit. When Jez moves back in and re-establishes the property as his main residence, the clock resets. The second absence (4 years) starts a fresh 6-year count. Because both absence periods are individually within 6 years, the full gain may be exempt.

Important: You must genuinely live in the property when you move back. The ATO will look at whether you re-established it as your main residence — staying for a weekend visit is unlikely to reset the clock.

Broken rental periods add up cumulatively

If the property is rented intermittently during a single absence (with vacant gaps in between), all the income-producing periods within that absence are added together to determine whether you are within 6 years.

Example: Lisa (broken rental, 6 years total)

Lisa moves out of her home and rents it for 3 years. She then leaves it vacant for 2 years. She rents it again for 3 years, then leaves it vacant for another 2 years before selling.

• Total income-producing time: 3 + 3 = 6 years
• Total vacant time: 2 + 2 = 4 years (these do not count toward the 6-year income-producing limit)
• Total absence: 10 years

Result: Because the total income-producing period is exactly 6 years, Lisa can claim the full main residence exemption. The vacant periods do not count toward the 6-year limit — only the rental periods do. If she had rented for even one additional day beyond 6 years total, a partial exemption would apply.

Source: ATO — Treating former home as main residence, retrieved 17 Feb 2026.

Buying a new home: the 6-month overlap rule

A common scenario: you sell your old home and buy a new one. There is often a period where you own both. The ATO provides a 6-month overlap grace period, allowing you to treat both properties as your main residence simultaneously — but only if all three conditions are met:

1. You lived in the old home as your main residence for a continuous period of at least 3 months in the 12 months before you sell it.
2. The old home was not rented out during any period when it was not your main residence.
3. The new home becomes your main residence.

If these conditions are satisfied, the old home remains fully exempt (main residence exemption continues), and the new home starts building its exemption from the date you move in. The overlap cannot exceed 6 months.

If any condition is not met — for example, you rented out the old home during the overlap — the grace period does not apply, and you may need to apportion the main residence exemption between the two properties.

Source: ATO — Moving to a new main residence, retrieved 17 Feb 2026.

What happens after 6 years: the partial exemption

If you rent out your former home for more than 6 years before selling, the main residence exemption is not lost entirely. Instead, a partial exemption applies. The taxable portion of the gain is calculated using a day-count formula:

Assessable gain = Total capital gain x (Non-main-residence days / Total ownership days)

The non-main-residence days are the days beyond the 6-year deemed main residence period. The total ownership days are from acquisition to the CGT event (contract date).

Example: Roya (partial exemption after exceeding 6 years)

Roya buys a home for $400,000 and lives in it for 6 years. She then moves out and rents it for 12 years before selling for $720,000.

• Total ownership: approximately 18 years (6,570 days)
• Main residence period: 6 years lived in + 6 years deemed = 12 years (4,380 days)
• Non-main-residence days: 6,570 - 4,380 = 2,190 days
• Total capital gain: $720,000 - $400,000 = $320,000

Assessable gain = $320,000 x (2,190 / 6,570) = $106,666

After the 50% CGT discount (held for more than 12 months):

Taxable gain = $106,666 x 50% = $53,333

If Roya earns $90,000 in other income, the $53,333 is added to her taxable income. The estimated additional tax is approximately $17,700 (including Medicare levy).

Without the 6-year rule, Roya’s non-main-residence period would have been 12 years (4,380 days) instead of the 6 years (2,190 days) in this calculation. The assessable gain would have been approximately $213,333, and the estimated tax (after the 50% discount) would have been roughly $39,000 — more than double.

The 6-year rule saved Roya approximately $21,300 in this scenario, even though she exceeded the 6-year limit.

Cost base reset: market value when rent starts

When your main residence first becomes income-producing (after 20 August 1996), the cost base resets to the market value of the property at that date. This is important because:

• If the property increased in value while you lived in it, that growth is covered by the main residence exemption and is not taxable.
• The market value at the date rent commenced becomes the new starting point for any future CGT calculation, should the exemption not fully cover the sale.

For example, if you bought for $350,000, the property was worth $500,000 when you moved out and started renting, and you later sell for $700,000 after exceeding the 6-year window, the relevant gain for the partial exemption calculation is based on the $500,000 market value, not the $350,000 purchase price.

Practical tip: Get a market valuation (or at minimum, gather comparable sales evidence) when you first rent out your former home. Without evidence of the market value at that date, you may find it difficult to establish the correct cost base if you sell years later.

Source: ATO — Treating former home as main residence, retrieved 17 Feb 2026.

Pre-move business or income use: permanently taints that portion

If you used part of your home for income-producing purposes before you moved out (for example, renting a room, or running a business from a home office that was set aside exclusively for that purpose), that portion of the property is permanently excluded from the main residence exemption. The 6-year rule does not cure prior income use — it only covers the period after you move out.

Example: Helen (pre-departure income use)

Helen lives in her home and uses 25% of the floor area exclusively as a medical surgery (income-producing). She then moves out and rents the entire property.

Result: The 25% used as a surgery was never covered by the main residence exemption, so 25% of the total capital gain is always assessable — regardless of the 6-year rule. The 6-year rule can only apply to the remaining 75%.

This also applies if you rented out a room while living in the property, or if a clearly defined portion of the home was used exclusively to earn income (not merely working from home occasionally).

Source: ATO — Using your home for rental or business, retrieved 17 Feb 2026.

Foreign residents: excluded from the exemption

Since 30 June 2020, foreign residents (including Australians who have become tax non-residents) generally cannot access the main residence exemption, including the 6-year absence rule. This means:

• If you move overseas and cease being an Australian tax resident, the main residence exemption no longer applies — even if you previously lived in the property as your main residence.
• A limited life events exception may apply in certain circumstances, such as terminal illness, death of a spouse, or a relationship breakdown. The exception has strict conditions and typically requires the CGT event to occur within 6 years of the relevant life event.

If you are considering moving overseas while still owning your former home, the timing of the sale and your residency status at the time of the CGT event are critical. The tax consequences can be substantial.

Source: ATO — Treating former home as main residence, retrieved 17 Feb 2026.

Worked examples

Example 1: Full exemption within 6 years

David buys an apartment in Melbourne for $480,000 in 2018 and lives in it as his main residence. In March 2022, he moves to Sydney for work and rents out the Melbourne apartment. He rents (does not buy) in Sydney.

• March 2022: David moves out. The 6-year clock starts.
• January 2027: David sells the apartment for $640,000 (4 years and 10 months after moving out).
• David has not treated any other property as his main residence.

Result: David can choose to treat the apartment as his main residence under the 6-year rule. The $160,000 capital gain may be fully exempt from CGT. If David had not used the 6-year rule, with a $95,000 salary and the 50% CGT discount, the estimated additional tax would have been approximately $28,400.

Example 2: Clock resets with re-occupation

Angela buys a house for $520,000 and lives in it for 4 years. She moves out and rents it for 5 years. She then moves back in for 18 months, genuinely re-establishing it as her main residence. She moves out again and rents it for another 4 years before selling for $810,000.

• First absence: 5 years (within 6-year limit)
• Re-occupation: 18 months (clock resets)
• Second absence: 4 years (within new 6-year limit)

Result: Both absence periods are individually within 6 years. The full capital gain of $290,000 may be exempt from CGT. Without the 6-year rule, the estimated additional tax (with 50% discount, $90,000 salary) would have been approximately $32,000.

Example 3: Partial exemption after exceeding 6 years

Kim buys a home for $550,000 and lives in it for 5 years. She moves out and rents it continuously for 9 years before selling for $850,000. She does not buy another home.

• Total ownership: 14 years (5,110 days)
• Main residence period: 5 years lived in + 6 years deemed = 11 years (4,015 days)
• Non-main-residence days: 5,110 - 4,015 = 1,095 days (the 3 years beyond the 6-year limit)
• Total capital gain: $850,000 - $550,000 = $300,000

Assessable gain = $300,000 x (1,095 / 5,110) = $64,286

After the 50% CGT discount:

Taxable gain = $64,286 x 50% = $32,143

If Kim earns $95,000 in other income, the estimated additional tax is approximately $10,300 (including Medicare levy).

Without the 6-year rule, the assessable portion would have been based on all 9 years of absence (3,285 days), resulting in an assessable gain of approximately $192,857, and estimated tax of roughly $35,000 after the discount. The 6-year rule saved Kim approximately $24,700 in this scenario.

Common mistakes and traps

1. Assuming the rule is automatic. The 6-year rule is an election. If you do not choose to apply it in your tax return, you may end up paying CGT on a gain that could have been exempt. Make sure your tax agent knows you want to make the election.

2. Nominating a new main residence. If you buy a new home and treat it as your main residence, the 6-year rule stops applying to your former home for the overlapping period. The difference between renting and buying in the new location can mean tens of thousands in CGT.

3. Losing track of the 6-year deadline. The clock is strict. If you sell 6 years and 1 day after the property became income-producing, a partial exemption applies. Record the exact date you moved out and first rented the property.

4. Confusing rented and vacant periods. Only income-producing periods count toward the 6-year cap. Vacant periods do not. But if you mix rental and vacant periods within one absence, all the rental periods are added together cumulatively.

5. Brief visit does not reset the clock. Moving back for two weeks does not re-establish the property as your main residence. The ATO looks at whether you genuinely lived there — your mail, your daily routine, your intention. A genuine re-establishment typically requires a sustained period of residence.

6. Forgetting the cost base reset. When your home first becomes income-producing, the cost base resets to market value at that date. Without a valuation from that time, you may struggle to prove the correct cost base years later.

7. Ignoring the foreign resident exclusion. If you cease being an Australian tax resident, the main residence exemption (including the 6-year rule) no longer applies from 30 June 2020 onwards. Selling before changing residency status may be critical.

8. Pre-move income use. If you rented a room or ran a business from a dedicated space before moving out, that portion is permanently excluded from the exemption. The 6-year rule cannot retroactively fix this.

When to get professional advice

The 6-year rule is powerful, but the interactions between residency status, multiple properties, pre-move income use, partial exemptions, and cost base resets can be genuinely complex. Consider speaking with a registered tax agent or accountant if:

• You are approaching the 6-year limit and deciding whether to sell
• You are considering buying a new home while still owning your former residence
• You are moving overseas or changing tax residency status
• You used part of the property for business before moving out
• You have moved back in and want to confirm the clock has reset

The capital gains tax calculator estimates the potential CGT on a property sale. The investment property spreadsheet includes hold-vs-sell modelling that factors in the 6-year rule, the 50% CGT discount, and income level.

Hold vs sell: model both paths before listing

Most owners only ask, “How much CGT will I pay if I sell now?” The better question is:

1. Sell now: what is your after-tax equity after agent fees, CGT, and discharge costs?
2. Hold for 1 to 3 more years: how much rent, tax, and equity change do you expect, and what happens if you cross the 6-year boundary?

The decision can swing by tens of thousands once you account for timing around the 6-year limit and your marginal tax rate. Use the calculator first for a single-year tax estimate, then use the spreadsheet to compare hold vs sell cash outcomes side by side before committing.

Disclaimer

This guide is general information only and is not tax advice, financial advice, or a recommendation to buy, sell, or hold any property. The 6-year absence rule has detailed conditions that depend on your personal circumstances, including your residency status, property use history, and whether you have nominated other properties as your main residence. Tax rules can change. Consider speaking with a registered tax agent or accountant for advice specific to your situation. We are not affiliated with the ATO or any state revenue office.