Partial PPOR Exemption: CGT Guide
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Primary tax-year context: Current Australian tax settings
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General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.
Your main residence (principal place of residence, or PPOR) is generally exempt from Capital Gains Tax. But what happens when you didn’t live there for the entire time you owned it?
If you rented out your home, moved overseas, or bought the property before moving in, you may only qualify for a partial exemption. This guide explains how it works.
The full main residence exemption
To qualify for a full CGT exemption, your property must have been your main residence for the entire time you owned it. This typically means:
- You lived in it as your home from purchase to sale
- You didn’t use it to produce income (e.g., renting out rooms)
- You didn’t have another property treated as your main residence during this time
When these conditions are met, the entire capital gain is exempt from CGT.
When you get a partial exemption
A partial exemption applies when:
- The property was your main residence for only part of the ownership period
- You rented it out for some of the time
- You acquired it before you moved in (but within certain limits)
- You had another main residence during part of the ownership
The exempt portion is calculated based on the time the property was your main residence compared to the total ownership period.
How the partial exemption is calculated
The ATO uses this formula:
Exempt percentage = (Days as main residence + Absence days if applicable) / Total days owned
The taxable portion of your capital gain is:
Taxable gain = Total capital gain × (1 - Exempt percentage)
If you held the property for more than 12 months, the 50% CGT discount can then be applied to the taxable portion.
Worked example
| Factor | Details |
|---|---|
| Purchased | 1 July 2015 |
| Sold | 30 June 2025 |
| Total ownership | 10 years (3,652 days) |
| Lived in as PPOR | 6 years (2,191 days) |
| Rented out | 4 years (1,461 days) |
| Capital gain | $200,000 |
Calculation:
- Exempt percentage = 2,191 / 3,652 = 60%
- Taxable portion = $200,000 × 40% = $80,000
- After 50% CGT discount = $40,000
The $40,000 is added to your assessable income and taxed at your marginal rate.
The 6-year absence rule
There’s an important exception: the 6-year absence rule (also called the 6-year temporary absence rule).
If you move out of your main residence and rent it out, you can choose to continue treating it as your main residence for CGT purposes for up to 6 years, even while you’re earning rental income from it.
Key conditions
- The property must have been your main residence before you moved out
- You can’t treat another property as your main residence during this time
- If you move back in, the 6-year clock resets
- You must eventually sell or move back in — the exemption isn’t permanent
How it helps
Without the 6-year rule, renting out your home for even one day would trigger a partial exemption calculation. With the rule, you can rent it out for up to 6 years without losing the full exemption.
Example: You live in your home for 5 years, rent it out for 4 years while working overseas, then sell. Using the 6-year absence rule, the entire gain is exempt (because 4 years of absence is within the 6-year limit).
Learn more in our 6-year absence rule scenario.
Properties acquired before moving in
If you bought a property and didn’t move in immediately (for example, it was rented out first or under renovation), special rules apply.
General rule
The period before you move in is not counted as main residence days, reducing your exemption percentage.
Exception for quick occupancy
Per ATO guidance (IT 2167), if you move into the property as your main residence “as soon as practicable” after acquiring it — generally within 12 months — and you live there for at least 3 months, you may be able to treat the entire pre-occupancy period as main residence days. The 12-month period is an interpretive guideline, not a statutory deadline.
This is particularly relevant for:
- New builds where you’re waiting for construction
- Properties purchased with existing tenants
- Renovation projects
Renting out part of your home
If you rent out part of your main residence (like a spare room on Airbnb), the rental portion may be subject to CGT based on:
- Floor area used for rental purposes
- Time the rental arrangement was in place
This gets complex quickly — a tax agent can help apportion the gain correctly.
Choosing which property is your main residence
If you own multiple properties, you can only treat one as your main residence at any time. You don’t formally elect this with the ATO — it’s based on facts and circumstances:
- Where you live
- Where your family lives
- Where you receive mail
- Electoral roll address
- Which property is furnished as a home
The ATO looks at the overall pattern of use, not just stated intentions.
Common mistakes
1. Forgetting to claim the 6-year rule
Many people don’t realise they can use the 6-year absence rule and end up paying CGT they could have avoided.
2. Having two main residences
You can’t claim the main residence exemption on two properties at the same time. If you buy a new home before selling the old one, check which property you should treat as your main residence during the overlap.
3. Not keeping records
You need to be able to prove when you moved in, when you moved out, and how the property was used. Keep:
- Settlement statements
- Moving records (removalist receipts, utility connections)
- Rental agreements
- Electoral roll records
4. Missing the 12-month pre-occupancy window
If you wait too long to move in, you lose the ability to backdate the main residence status.
Key takeaways
- Partial PPOR exemptions reduce but don’t eliminate your CGT liability
- The 6-year absence rule can preserve your full exemption when renting out
- Record keeping is essential to prove your main residence periods
- You can only have one main residence at a time
- The 50% CGT discount can apply to the taxable portion
Related tools
- Capital Gains Tax Calculator — includes PPOR exemption calculation
- PPOR vs investment property scenario
- 6-year absence rule scenario