The 6-year absence rule (Section 118-145 ITAA 1997) lets you rent out your former home for up to 6 years while keeping its main residence CGT exemption. It resets when you move back in and can be used more than once.
The starting point: your principal place of residence (PPOR) is exempt from capital gains tax when you sell. If you move out and start renting the property, ordinarily that exemption would end and future growth would be taxable. Section 118-145 gives you an option: you can elect to treat the property as your main residence for up to 6 years of absence.
During that 6-year window:
→You can rent the property out and collect income (which is still assessable at your marginal rate)
→You can claim all the normal rental deductions — loan interest, rates, insurance, depreciation, negative gearing
→If you sell within 6 years of moving out, the sale is 100% CGT-free
→If you move back in before 6 years are up and re-establish main residence, the clock resets
The cost of this concession: you can't also claim the main residence exemption on another home you've moved into. You choose one main residence for CGT purposes. This matters most if you've bought a new home after moving out.
Non-income use
If the Property Isn't Rented Out
If you move out but don't rent the property — keeping it vacant, letting family stay rent-free, using it as a holiday house — the exemption is unlimited in time. The 6-year cap only kicks in when the property produces income.
This is an important distinction often missed. A military officer posted overseas for 10 years who leaves their home vacant could sell tax-free on return. The same officer who rented the home out for 10 years to fund the posting would be partially taxed on the excess over 6 years.
"Holiday use" by the owner occasionally during the absence generally doesn't break the exemption, but evidence matters — you're claiming the property is your main residence, so treat it like one.
Clock reset
Resetting the 6-Year Clock
The rule allows unlimited resets. Move back in, re-establish the property as your main residence (genuinely — utilities in your name, electoral roll, mail delivered there, sufficient time lived in), then move out again: a fresh 6-year window begins.
Practical example: a teacher on 4-year country placements could use this pattern:
→Buy and live in Sydney home, years 1–3
→Move to country posting, rent Sydney home, years 4–7 (within 6 years — all exempt)
→Return to Sydney for 6 months, re-establish main residence, year 8
→Move again, rent out years 9–14 (fresh 6-year clock — still all exempt)
→Sell at year 15 — 100% CGT exempt across the entire ownership
The ATO scrutinises artificial resets. A two-week stay between rentals will not satisfy the "re-established as main residence" requirement. Think months, not weeks, and maintain genuine connection to the property.
Partial exemption
When You Exceed 6 Years: Partial Exemption
If you're absent more than 6 years and sell, the exemption doesn't vanish — it's apportioned. The taxable portion of the capital gain is calculated based on the non-exempt days divided by total ownership days.
The "home first used to produce income" rule
Section 118-192 applies: when you first start using a main residence to produce income, the property is deemed to be acquired at market value on that day for CGT purposes. This resets the cost base to the market value on the day you first rented it out, so your taxable gain only accrues from that point.
Worked example
Sarah buys her home in 2010 for $500,000. She moves out in 2018 and rents it. In 2018 the property is worth $800,000. She sells in 2027 (9 years of absence, 3 years beyond the 6-year window) for $1.4 million.
Market value on first income date (2018)$800,000 — new CGT cost base under s118-192
Sale price$1,400,000
Gross gain$600,000
Exempt period (first 6 of 9 absence years)6/9 × $600,000 = $400,000 exempt
Taxable portion3/9 × $600,000 = $200,000
After 50% CGT discount$100,000 taxable
Tax at 37% marginal$37,000
Selling one day before the 6-year window closes versus one day after is the difference between zero tax and tens of thousands. Planning the sale date is high-leverage.
One main residence rule
The "Only One Main Residence" Trap
You can only have one main residence for CGT purposes at a time. If you've moved out of Property A and bought Property B, you have to choose at the time of sale which one the exemption applies to.
Young family upsizes
Keep old apartment as rental (use 6-year rule) and buy new family home. At sale of apartment years later, apartment is CGT-free — but the new family home starts its own CGT clock from the day you moved out of the apartment.
Defence force posting
Couple owns Perth home, posted to Canberra, rents Perth out and rents in Canberra. Perth home stays CGT-free under 6-year rule. No Canberra home to compete.
Sea change
Retire from Melbourne, buy coastal home in Qld, rent Melbourne. You must decide when selling which one claims the exemption — run the numbers on both.
You only lock in this choice when you sell. You can claim the exemption retroactively on whichever property produces the better outcome, but you must be able to substantiate the main residence status of whichever you choose.
Non-residents
Foreign Residence Changes (From 2020)
From 30 June 2020, non-residents selling their former Australian main residence generally cannot claim the main residence exemption — even if they lived there for decades and the 6-year rule would otherwise apply.
Life events can preserve partial access: terminal illness, death of spouse/minor child, divorce. These are the "life events exception" — narrow, specific, and require evidence. Ordinary employment-driven overseas postings don't qualify.
Key action: if you're contemplating an overseas move and may sell while overseas, consider selling before you become non-resident. Selling while still an Australian resident preserves the main residence exemption including the 6-year rule.
Records
Records You Must Keep
The ATO can request evidence years after the sale. Maintain:
→Purchase contract and settlement statement — for the property
→Evidence of genuine main residence — before each absence — utility bills, driver's licence, electoral enrolment, mail, personal effects
→Dates of each absence — when you moved out, when you moved back in
→Rental agreements during absences — dates, rent received, agent records
→Market valuation on the first day of rental — for s118-192 cost base reset
→Details of any other property owned — during absences — these are the alternatives if the ATO challenges your election
Common mistakes
Common Mistakes
→Claiming the rule on a property you never genuinely lived in — The pre-absence main residence test is real. An investment bought as a rental from day one does not qualify, no matter how brief a 'move-in' you stage.
→Double-dipping — Trying to claim the exemption on two properties simultaneously. You can only have one main residence.
→Forgetting about year-7 sales — Waiting until year 7 or 8 to sell because the market seemed strong — now facing partial exemption maths that erase the benefit.
→Not getting the cost base valuation — Selling after 10 years of absence without a period-start valuation means the ATO uses whatever figure can be justified — usually not in your favour.
→Artificial resets — Moving back in for a fortnight to 'restart the clock'. This fails ATO scrutiny and can trigger penalties.
→Losing Australian residency — Leaving Australia, becoming non-resident, then selling — removes the exemption entirely in most cases.
The CGT 6-year absence rule (Section 118-145 ITAA 1997) lets you treat a former principal place of residence as your main residence for up to 6 years while it's rented out — preserving the CGT exemption when you eventually sell. You can reset the 6-year clock by moving back in before the period expires.
Can I claim the 6-year rule for multiple properties at once?
No. You can only have one main residence for CGT purposes at any time. If you buy and move into a new home while your former home is rented under the 6-year rule, you must choose which property gets the exemption — you can't claim both simultaneously.
Does the 6-year clock reset if I move back in?
Yes. Moving back into the property and genuinely re-establishing it as your main residence restarts the 6-year clock. There's no limit on how many times you can do this. Each new absence can attract another 6-year window provided you re-establish residency between absences.
What if I'm absent for more than 6 years?
The exemption only covers the first 6 years of absence. Beyond that, the period after year 6 is taxable. On sale, the capital gain is apportioned: the fraction attributable to the post-6-year period is taxed at your marginal rate (with the 50% discount if held over 12 months). The property's market value at the 6-year cutoff typically sets the cost base for the taxable portion.
Do I need to own another home during the absence?
No — but if you do own another home and claim the 6-year rule on the former property, you can't also claim the exemption on the home you're living in. You choose one. For renters who move between cities for work, this is usually straightforward. For homeowners who buy in each new city, the choice has tax consequences.
Can I rent out the property for income during the absence?
Yes. The 6-year rule is specifically designed for absent-and-rented scenarios. You can earn rental income, claim deductions (including negative gearing), and still preserve the CGT exemption on sale. If the property is not income-producing during absence, an unlimited exemption applies instead of the 6-year cap.
What if I move overseas?
The 6-year rule still applies if you remain an Australian tax resident. However, if you become a non-resident and sell while non-resident (from 30 June 2020 onward), you lose the main residence exemption entirely under the foreign resident CGT changes. Life events like bereavement, terminal illness, divorce, or family death can preserve partial access — check with an adviser.
Can I claim this on a property I never lived in?
No. You must have genuinely established the property as your main residence before the first absence begins. Moving in for a few weeks purely to claim the exemption doesn't satisfy the 'genuine main residence' test. The ATO looks at connection of services, electoral enrolment, mail, and actual time lived in.
How does the 6-year rule interact with the 50% CGT discount?
If you're absent for more than 6 years, the taxable portion of the gain is calculated, then the 50% discount applies (provided you've held the property over 12 months and are an Australian resident at sale). For the first 6 years of absence, the gain is fully exempt — no discount needed.
What records should I keep?
Records of move-in date, move-out date (for each absence), rental agreements during the absence, evidence of main residence election (utility bills, electoral rolls, mail), details of any other properties owned during the absence, and records of move-back-in dates if you reset the clock. The ATO can request these years after the sale.
This guide explains Section 118-145 of the Income Tax Assessment Act 1997 and related provisions. Rules are current to 2025-26. Complex situations — deceased estates, foreign residency transitions, multiple main residence claims, and partial use — benefit from advice from a registered tax agent.