Australia
What happens if you rent out your home for more than 6 years?
You keep the exemption for the first 6 years of letting and lose it only for the period beyond. On a $600,000 gain after 6 years living there, selling at exactly 6 years of letting costs $0. Selling one year later costs an estimated $7,385. Going past the limit does not cancel the relief, it apportions it.
| Maximum exempt absence, if let | 6 years |
| Maximum exempt absence, if left empty | No limit |
| What happens past the limit | Partial exemption, apportioned by days |
| CGT discount if held over 12 months | 50% |
| Tax at exactly 6 years let | $0 |
| Tax at 7 years let | $7,385 |
What happens when you pass the 6-year limit?
The exemption is apportioned, not withdrawn. This is the single most common misunderstanding of the rule, and it matters because the two outcomes are very far apart in money.
The Australian Taxation Office treats a former home that you let as still being your main residence for up to 6 years from the day you moved out. Sell within that window and the gain is exempt. Sell later and the exemption still covers everything up to the 6-year mark; only the days beyond it are assessable, worked out as the gain multiplied by the non-exempt days and divided by the total days you owned it.
What does each extra year of letting actually cost?
This is the table the competing pages do not publish. One property, bought for $700,000, lived in for 6 years, then let and sold at the end of the letting period for $1,300,000. The only thing that changes down the table is how long it was let.
| Years let after moving out | Assessable gain | After the 50% discount | Estimated tax |
|---|---|---|---|
| 4 (inside the rule) | $0 | $0 | $0 |
| 6 (inside the rule) | $0 | $0 | $0 |
| 7 | $46,154 | $23,077 | $7,385 |
| 8 | $85,714 | $42,857 | $14,264 |
| 10 | $150,000 | $75,000 | $26,800 |
| 12 | $200,000 | $100,000 | $37,350 |
Bought $700,000, sold $1,300,000, lived in for 6 years, owner with $100,000 of other income, 2026-27 rates including the 2% Medicare levy. Estimates, not advice.
Two things stand out. Crossing from 6 to 7 years costs $7,385 on this case, which is the price of the first year past the limit. And the cost of each further year falls, not rises, because the assessable share is a fraction of a growing ownership period.
Compare that with never having lived there at all. The same purchase and sale as an investment property throughout produces an estimated $131,350. Even at 12 years of letting, having lived in it first is worth $94,000.
Does the limit apply if the property is left empty?
No. The 6-year limit applies only where the property is used to produce income. A former home left empty can be treated as your main residence for as long as you like, with no time limit at all.
| Absence of 12 years | Estimated tax |
|---|---|
| Let out for the whole 12 years | $37,350 |
| Left empty for the whole 12 years | $0 |
The same property and the same dates. The difference is only whether it earned rent.
That is a real decision for anyone posted overseas for a long period, and the arithmetic is rarely put next to the rent. Rent for a year is not free if it costs part of an exemption.
What are the conditions?
The rule is a choice you make, not something applied automatically, and it carries a cost:
- The property must genuinely have been your main residence before you moved out. Buying an investment property and moving in briefly does not start the clock the same way.
- You cannot treat another property as your main residence for the same period. If you bought a new home while letting the old one, using the rule on the old property leaves the new one exposed for those years.
- The choice is made in the tax return for the year of the sale, not when you move out, so it can be made once both figures are known.
- Each separate absence gets its own 6 years. Moving back in and re-establishing the property as your main residence resets the clock for any later absence.
The second point is the one that costs people money. The rule is not free relief, it is relief moved from one property to another, and which way round is better depends on which property grew faster over those years.
Which dates count?
Contract dates, not settlement dates, at both ends. A sale contracted in June and settled in August falls in the earlier tax year, which can matter when an absence is close to the 6-year mark.
A separate rule can apply where a home is first used to produce income after 20 August 1996: the property is treated as acquired at its market value on the day it was first rented. Where that applies, a valuation at that date, rather than the original purchase price, is the figure to use in the calculator.
Open the Australian capital gains tax calculator
Common questions
What is the 6-year rule for capital gains tax in Australia?
It lets you keep treating a former home as your main residence for up to 6 years after moving out, even while renting it out, so the gain for that period stays exempt from capital gains tax. Sell inside the window and there is normally nothing to pay.
What happens if I rent my home out for more than 6 years?
The exemption is apportioned rather than lost. Everything up to the 6-year mark stays exempt and only the days beyond it are assessable, calculated as the gain multiplied by the non-exempt days divided by the total days owned. On the case worked through above, the first year past the limit costs an estimated $7,385.
Is there a limit if I leave the property empty instead of renting it?
No. The 6-year limit applies only where the property is used to produce income. A former home that earns nothing can be treated as your main residence indefinitely, provided no other property is treated as your main residence at the same time.
Can I use the 6-year rule more than once?
Yes. The limit applies to each separate absence that follows a period of actually living in the property, so moving back in and re-establishing it as your main residence starts a fresh 6 years for any later absence.
Do I have to decide when I move out?
No. The choice is made in the tax return for the year in which the sale contract is signed, so it can be made once you know what each option is worth. That is also why it is worth running the figures both ways before filing.
Does the 50% discount still apply?
Yes, on the assessable part, provided you owned the property for more than 12 months. The discount is applied after the apportionment and after any capital losses, which is the order used in the table above. From 1 July 2027 the discount is replaced by cost base indexation and a 30% minimum rate, which is law but applies only to gains accruing after that date.
This is an estimate for general information only, not tax, legal or financial advice. Tax rules are complex and depend on your circumstances, and figures may not reflect the latest changes. Confirm your position with Australian Taxation Office (ato.gov.au) or a qualified tax adviser before acting. The terms of use set out the limits of this estimate and of our liability.
Your figures are worked out in your browser. They are not sent to us or stored.