The six year rule lets you move out of your home, rent it out, and keep treating it as your main residence for capital gains tax for up to six years. Sell inside that window and the gain can be completely exempt, as if you had never left. Leave it vacant instead of renting it and there is no time limit at all.
The rule has three catches. While the old place is your main residence, no other home can be, apart from a six-month overlap when moving. Go past six years and part of the gain becomes taxable, measured from the property's value on the day you first rented it. And sign the sale contract as a foreign resident for tax purposes and you generally lose the exemption entirely. Below are the rules and two worked examples you can rerun in our capital gains tax calculator.
How the six year rule works
Normally a property stops being your main residence when you move out. The ATO lets you choose to keep treating it as your main residence:
- for up to six years if you use it to produce income, such as rent
- indefinitely if you do not use it to produce income, for example if you leave it vacant or let family live there rent-free.
While the choice applies, the property is exempt exactly as if you still lived there, and you can end the period early if that suits you.
The six years count income-producing time only. In one ATO example, an owner rented her house for three years, left it vacant for two, rented it for three more and left it vacant for two. Her income-producing time totalled six years, so the whole ten-year absence was covered.
There is no form. You make the choice in your tax return for the year you sign the sale contract (the contract date, not settlement), reporting the CGT event with the exemption applied.
Who can use it
- It must have been your home first. The exemption cannot cover any period before the property first became your main residence, such as years you rented it out before moving in.
- You actually moved out. The ATO looks at where your family lives, where your belongings are, your mail and electoral roll address, and whether services are connected.
- You claim no other main residence for the same period. Spouses either choose one home for both of them or each nominate a different one, which triggers special apportionment rules.
- No part was used to earn income before you left. In the ATO's example, an owner who used 25% of her house as a doctor's surgery before moving out paid CGT on 25% of the gain, despite the six-year choice.
- You are an Australian resident for tax purposes when you sign the sale contract, unless you meet the narrow life events test covered below.
- Only up to 2 hectares of land around the dwelling is covered.
The one main residence trade-off
This bites people who buy again while away. Buy a new home and live in it, and you must decide which property gets main residence status for the overlap; the six-month allowance only covers a straight changeover.
The maths runs on time, not on which property grew faster during those years. A partly exempt home is taxed on its whole gain multiplied by the non-exempt days over the days you owned it. Cover your old home for the overlap and the new home loses that slice of its entire eventual gain, which could be decades of growth. Cover the new home and the old one becomes taxable from that point. In one ATO example, an owner who moved from Brisbane to Perth chose to cover the Brisbane house only until he bought in Perth, then paid CGT on Brisbane for the years after.
If you rent where you live, as people rentvesting do, there is no conflict, because a home you rent is not one you own. The rule only helps a rentvestor whose investment was once their own home.
Resetting the six years by moving back in
The six-year limit applies to each period of absence separately. An absence ends when you stop renting the property and move back in. Leave again later and a fresh six years starts.
The ATO's example: an owner rented his house out for five years, moved back in for two, then rented it for four more before selling. Neither absence exceeded six years, so the full gain was exempt.
The ATO's guidance names no minimum stay, but moving back has to make it your home in fact, judged on the same tests: family, belongings, mail, electoral roll and utilities. A token fortnight with a suitcase is not that.
What happens after six years
Rent it for more than six years in one absence and you pay CGT on the period after the sixth year. Two rules shape the bill.
The market value reset. If you first rented the home after 20 August 1996, you are treated as having acquired it on that day at its market value, which plus later allowable costs becomes your cost base. The ATO says you must get a market valuation at that point. The reset does not apply if the property is fully exempt, if you rented it out from the day you bought it, or if you are a foreign resident when you sell.
Apportionment by days. The taxable share is the gain multiplied by the days after the six-year limit, divided by the days since you first rented it out. The 50% discount then applies if you have held it for more than 12 months, under the rules in force until 1 July 2027. Sell within 12 months of first renting it and the ATO says no discount is available.
Capital works deductions you claimed during the rental years generally reduce your cost base. And because the fittings were used in your own home, you cannot depreciate them once you rent it out, one of the rules in our guide to investment property tax deductions.
Worked example 1: sold within six years
Say you bought a Brisbane townhouse for $550,000 in March 2019 and lived in it. In March 2022 your job moved you to Melbourne, where you rented an apartment, and a property manager let the townhouse from the week you left. In March 2027 you sign a contract to sell it for $820,000. All figures are hypothetical.
Your absence with tenants is five years, inside the limit, and you own no other home. You choose to treat the townhouse as your main residence for the whole absence, so the roughly $270,000 gain is disregarded. CGT payable: $0, and you claimed the rental deductions along the way.
Had you bought and moved into a Melbourne apartment in March 2024, you would have to choose: cover the townhouse for 2024 to 2027 and leave the apartment's first three years unsheltered, or the reverse.
Worked example 2: rented for more than six years
Say you bought a 1970s Perth house for $480,000 in July 2013 and lived in it. On 1 July 2017 you moved to Sydney for work, rented the Perth house out, and had it valued at $560,000. You rented in Sydney and never bought another home. On 1 March 2027 you sign a contract to sell for $930,000, paying $22,000 in agent and legal fees. Being pre-1985 construction, the house had no capital works deductions to reduce the cost base. You earn $150,000 a year.
| Step | Figure |
|---|---|
| Deemed acquisition, 1 July 2017 market value | $560,000 |
| Capital gain: $930,000 less $560,000 and $22,000 costs | $348,000 |
| Days from 1 July 2017 to 1 March 2027 | 3,531 |
| Days after the six years ended on 1 July 2023 | 1,339 |
| Assessable gain: $348,000 × 1,339 ÷ 3,531 | $131,966 |
| After the 50% discount | $65,983 |
| Extra tax at 2026-27 rates plus 2% Medicare levy | about $27,812 |
The six year rule sheltered about 62% of the gain since 2017. Had you moved back in for a genuine stretch before mid-2023 and then left again, a new six-year period would have started and the whole gain could have been exempt.
Foreign residents: the rule that cancels the exemption
Plenty of people use the six year rule while working overseas, and this is where it goes wrong. For property sold after 30 June 2020, a foreign resident at the time of the contract cannot claim the main residence exemption at all: no partial exemption and no market value reset, even after years living there as an Australian resident.
The only way through is the life events test. You must have been a foreign resident for a continuous period of six years or less, and during that period one of these happened: you, your spouse or your child under 18 had a terminal medical condition; your spouse or child under 18 died; or the sale happened under a formal agreement after your relationship broke down.
Foreign residents also lose all or part of the 50% discount on assets acquired after 8 May 2012. And since 1 January 2025, a buyer must withhold 15% from any property sale unless the seller provides an ATO clearance certificate, so apply for one early. If you are overseas, your return date and the contract date matter more than anything else here.
How the 2027 CGT changes interact
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, so this is law, not a proposal. From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is replaced by cost base indexation and a 30% minimum tax on capital gains. The main residence stays exempt, and the ATO's main residence pages, updated in June 2026, describe the six year rule unchanged.
- Fully exempt sale: no effect. A gain that is disregarded is never taxed, under the old rules or the new.
- Partly exempt, contract signed before 1 July 2027: the current rules apply in full, as in example 2.
- Partly exempt, contract signed on or after 1 July 2027: the general transition applies, with the 50% discount on growth up to 1 July 2027 and indexation plus the minimum tax after it. You will need the property's 1 July 2027 value, from a valuation or a formula the ATO has said it will provide. Have a tax agent confirm how the day count and that split combine for a part-exempt home.
There is no reason to rush a sale to beat the change, because gains accrued before 1 July 2027 keep the discount whenever you sell. The practical move is a valuation as at 1 July 2027 if you will own a partly exempt former home past that date.
Negative gearing is separate. Grandfathering attaches to property held at 7:30pm AEST on 12 May 2026, so a former home you owned on Budget night keeps full negative gearing when rented. On the Budget explainer's wording, a home bought after that night and later rented out would face the loss limits from 1 July 2027, as our negative gearing and CGT explainer describes.
Records to keep
- Purchase contract and settlement statement.
- Proof you lived there: electoral roll, licence, utility bills.
- The dates you moved out and first rented or listed it.
- A market valuation from the date it was first rented.
- A log of rented, vacant and owner-occupied periods.
- Records of any other home you owned and which you chose.
- Receipts for improvements and capital works claimed.
- Evidence of your tax residency while overseas.
Keep CGT records for at least five years after the sale.
Frequently asked questions
Can I use the six year rule if I buy another house?
Yes, but not for the same period. You can only have one main residence at a time, apart from up to six months when moving house, so for any overlap you must choose which property is exempt. The other is taxed on that share of its gain when sold.
Does the six year rule reset if I move back in?
Yes. The six-year limit applies to each period of absence, and an absence ends when you stop renting the property and move back in. The return has to be genuine: the property must become your home again in fact.
What happens if I rent out my former home for more than six years?
You pay CGT on the period after the sixth year. If you first rented it after 20 August 1996, your cost base becomes its market value on the day you first rented it, and the gain is apportioned by days.
Can I use the six year rule if I move overseas?
You can be overseas during the absence, but you generally need to be an Australian resident for tax purposes when you sign the sale contract. Foreign residents cannot claim the main residence exemption unless they meet the life events test.
Do the 2027 CGT changes affect the six year rule?
No. The main residence exemption and the six year rule continue. The changes only matter if part of the gain is taxable and you sign the sale contract on or after 1 July 2027.
Where to start
If you are about to move out and rent your home, get a market valuation now and put the six-year anniversary in your calendar. Check your state's land tax too, because a home that becomes a rental can lose its exemption, as our land tax guide explains. Already past six years? Model a sale against moving back in, and confirm your residency before signing anything.
If you plan to buy in your new city, you can get matched with a buyer's agent who covers the area, but weigh that purchase against the main residence choice above before you exchange.
This is general information, not financial, legal or tax advice. Main residence choices are personal and hard to unwind, so confirm yours with a registered tax agent.
Sources
- Australian Taxation Office, "Treating former home as main residence". Last updated 22 June 2026, accessed 6 October 2026.
- Australian Taxation Office, "Eligibility for main residence exemption" and "When does a property stop being your main residence?". Last updated 22 June 2026, accessed 6 October 2026.
- Australian Taxation Office, "Using your home for rental or business" (home first used to produce income rule). Last updated 22 June 2026, accessed 6 October 2026.
- Australian Taxation Office, "Living separately to your spouse or children". Last updated 22 June 2026, accessed 6 October 2026.
- Australian Taxation Office, "Main residence exemption for foreign residents". Last updated 22 June 2026, accessed 6 October 2026.
- Australian Taxation Office, "CGT discount for foreign residents". Last updated 22 June 2026, accessed 6 October 2026.
- Australian Taxation Office, "Rental properties guide 2026" (NAT 1729-06.2026). Current at 1 June 2026.
- Australian Taxation Office, "Tax reform: Boosting home ownership, reforming negative gearing and capital gains tax". Accessed 6 October 2026.
- Australian Government, Budget 2026-27, "Tax explainer: Negative Gearing and Capital Gains Tax Reform". May 2026.
- Holding Redlich, "Update on status of key tax measures announced in Budget 2026-27". 28 July 2026.
- Australian Taxation Office, "Tax rates: Australian residents". Accessed 6 October 2026.
