6-Year Absence Rule

The 6-year absence rule, found in section 118-145 of the Income Tax Assessment Act 1997, lets you keep treating a property as your principal place of residence for CGT purposes for up to six years after you actually move out of it. During that window the exemption keeps operating as though you still lived there, even if the property is rented out to tenants the whole time — and unusually, you can also keep claiming the normal rental deductions (interest, rates, repairs) on the same property while it's covered by the rule, combining a tax-free capital gain outcome with ongoing income deductions.

This rule is the mechanism that lets people relocate — interstate for a job, overseas on a posting, or into a partner's home — without immediately losing the tax-free status of a home they still own but no longer live in. It's especially relevant for groups who move frequently for structural reasons, such as Defence Force members posted to different bases, or Australians working abroad for an extended stretch, where selling the family home before every move isn't practical or desirable.

The clock resets each time you move back in and re-establish the property as your main residence, even briefly — so a pattern of moving out, renting for years, moving back in for a year, then moving out again restarts a fresh 6-year period from the second departure. You can only apply the rule to one property at a time, since you cannot treat a different property as your main residence during the absence without losing the exemption on the first. If the absence stretches beyond six years without a reset, only the gain relating to the period beyond that sixth year becomes taxable, apportioned on a time basis rather than losing the exemption entirely.