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Tax Advice

CGT main residence exemption

If you sell your home, you are entitled to a Capital Gains Tax (CGT ) exemption known as the main residence exemption. There are some restrictions on when you can claim the main residence exemption – one of these is where you rent out your property while you are temporarily absent.

Renting out the main residence

Provided you do not treat another home as your main residence, you do not lose the main residence exemption if you cease to live in it and rent it out.

Six year time limit

But there is a six year time limit on the period for which you may rent your home out.

This six year period is extinguished every time you resume living in your home. If you later commence renting it out, the six year period recommences from the date you started renting out the property. That is, you have another six year period when you may be absent from your home without losing the exemption.

Thus, if you are a member of the Australian Defence Force, or on an official posting at an Australian overseas mission, and regularly return to Australia between postings, you will not lose the main residence exemption provided you return to live in your home within the six year period. If you are posted overseas again, when you rent out your property a new six year period will begin.

NB If you do not use your home to produce assessable income, you can continue to treat it as your main residence indefinitely.

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