When your home is fully exempt
- It was your main residence for the whole ownership period (you and your family lived there, your belongings were there, mail went there)
- You didn’t use it to produce assessable income
- The land is 2 hectares or less
- You’re an Australian resident when you sign the sale contract
The 6-year rule
After you move out you can keep treating the property as your main residence:
- up to 6 years for each period of absence in which you rent it out, or
- indefinitely if you don’t use it to earn income (for example, it’s left vacant or family live there rent-free)
You can’t treat another property as your main residence over the same period. In the ATO’s example, James rented out his Brisbane house from 2015 and bought a new home in Perth in 2020; he chose to stop the exemption when he bought the Perth house, so only the period from October 2020 to the 2026 sale is taxable.
Partial exemption
Days are counted from contract to contract, including both days. If part of the floor area was rented (e.g. a room), apply the floor-area percentage as well.
ATO example: Farnaz
Bought for $449,000 in October 2019, rented for 757 days, then lived in it until selling for $987,500 in April 2026 (2,355 days owned). Taxable gain $538,500 × 757 ÷ 2,355 = $173,097; after the 50% discount, a net capital gain of $86,548. Our property calculator reproduces this.
Home first used to produce income
If the property was your home first and you started renting it after 20 August 1996 (and the 6-year rule doesn’t cover the whole period), you’re treated as acquiring it at its market value on the day it was first rented. The CGT discount clock also restarts then. In the ATO’s example, Erin’s home was worth $650,000 when she first rented it in August 2025; selling for $696,000 in June 2026 gave a $46,000 gain with no discount.
Moving house
When you buy a new home before selling the old one, both can be exempt for up to 6 months if the old home was your main residence for a continuous period of at least 3 months in the 12 months before you sold it, you didn’t use it to produce income in any part of that 12 months when it wasn’t your main residence, and the new home becomes your main residence. If the overlap is longer than 6 months, only the last 6 months are covered.
Foreign residents
If you’re a foreign resident when you sign the sale contract, you can’t claim the main residence exemption – full or partial – unless you meet the life events test (foreign resident for a continuous period of 6 years or less, and in that time 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 a relationship breakdown). Foreign resident CGT.
Inherited homes
A dwelling inherited from someone who acquired it before 20 September 1985, or for whom it was their main residence just before death (and not used to earn income), is generally exempt if the sale settles within 2 years of the death (the ATO can extend this), or if it becomes the home of certain beneficiaries. The exemption isn’t available if the deceased had been a foreign resident for more than 6 continuous years at death. Other cases need a partial calculation – see the ATO’s inherited property guidance.
Frequently asked questions
Do you pay capital gains tax on your primary residence in Australia?
Not if it was your main residence for the whole time you owned it, you didn’t use it to earn income, and the land is 2 hectares or less. You must also be an Australian resident when you sell (unless the life events test applies).
How does the 6-year rule work?
When you move out of your home, you can choose to keep treating it as your main residence for up to 6 years if you rent it out, or indefinitely if you don’t. The 6 years reset each time you move back in. You can’t treat another property as your main residence for the same period (except up to 6 months when moving).
What happens after 6 years?
Days after the 6-year period are taxable. The taxable share is generally those days divided by your total days of ownership. If the home was first rented after 20 August 1996, the gain is measured from its market value when first rented, and the taxable days are divided by the days from when it was first rented to the sale (not the whole ownership period).
Is my home affected by the 2027 CGT changes?
No. The main residence exemption doesn’t change. If only part of the gain is exempt, the taxable part may be split between the old and new rules.
References
Every figure on this page was checked against these primary sources on 16 October 2026.
General information only – not financial or tax advice. See our disclaimer. Spotted an error? Email [email protected].