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The Australian tax system offers a valuable concession for homeowners under Section 118-145 of the Income Tax Assessment Act 1997, commonly known as the 6-Year Absence Rule. This provision can help you reduce—or even eliminate—capital gains tax (CGT) when you sell your former home, provided certain conditions are met.

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How the Rule Works

If you move out of your main residence and start renting it out, you can continue to treat it as your main residence for up to 6 years for CGT purposes. This means you may still qualify for the main residence CGT exemption, even while earning rental income.

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For example:
If you rent out your property, claim normal investment deductions (such as interest, maintenance, and other allowable expenses), and then sell it within 6 years of moving out, you may be able to avoid paying CGT altogether.

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No Set Minimum Occupancy Period

A common misconception is that you must live in the property for a specific amount of time before it qualifies as your main residence. In fact, the law does not specify a minimum period. However, the property must genuinely have been your main residence before you can apply the rule—you must be “present” before you can be “absent.”

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Important Limitations

• Partial Use Doesn’t Qualify – If you continue living in part of the property and rent out a room, the 6-Year Absence Rule does not apply.
• Overseas Properties Are Included – This rule can apply to overseas properties that are subject to CGT in Australia.
• Vacant Land Is Excluded – The exemption only applies to a dwelling, not empty land.

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Why This Matters

Understanding the 6-Year Absence Rule can make a significant difference to your tax position, especially if you’re relocating for work, upgrading homes, or investing in property. Correctly applying this provision can save you thousands in tax, but it’s important to get the details right to avoid unexpected liabilities.

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Maximise Your Property Tax Benefits with Plan Tax
At Plan Tax, we help property owners make the most of available tax concessions while staying fully compliant with ATO requirements. Whether you’re renting out your home, investing in property, or selling an asset, we can guide you through the rules so you can minimise tax and keep more in your pocket.

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Contact Plan Tax today to ensure you’re getting the right advice before you make your next property decision.