The CGT 6-year rule lets you keep treating a former home as your main residence for up to six years after you move out, while it is rented out — so the capital gain over that period can stay exempt from capital gains tax. It comes from the “absence” rule in section 118-145 of the Income Tax Assessment Act 1997. If the property earns no income while you are away, there is no six-year limit at all. The catch is that you can only treat one property as your main residence at a time, and the choice is made when you sell. This is general information, not tax advice — see the ATO on treating a former home as your main residence.
Last reviewed: 27 July 2026.
What is the CGT 6-year rule?
When you stop living in your home, you can choose to keep treating it as your main residence for CGT purposes even though you no longer live there. This is the absence rule in section 118-145 of the Income Tax Assessment Act 1997.
- If the dwelling is used to produce income — rented out, or otherwise earning assessable income — the choice covers a maximum of six years for that absence.
- If it is not producing income — left vacant, or lent to someone rent-free — the choice can cover the absence indefinitely, with no six-year cap.
You do not lodge anything to make the choice. It is made in the way you prepare your tax return for the year the property is sold, which is why the decision usually only becomes concrete at sale time.
When does the six-year clock reset?
The six years run per period of absence, not once per property. If you move back in and re-establish the dwelling as your main residence, a later absence starts a fresh six-year period.
That is why “the 6-year rule” is a poor description of what the section actually does: someone who moves out, rents the property for five years, moves back in, then moves out and rents it again can be covered for both absences. What matters is the sequence of dates, not a single six-year budget.
The law sets no minimum re-occupation period. Whether the dwelling genuinely became your main residence again is a question of fact, and the ATO looks at things like where your belongings are, your mail and electoral enrolment, and connected services.
You can only have one main residence at a time
While you are treating a former home as your main residence under the absence rule, you cannot treat another dwelling as your main residence for that same period. The exception is a limited six-month overlap when you are moving from one home to another, which lets both be covered while the old one is being sold.
This is the trade-off people most often miss: covering a rented-out former home for six years can mean the home you actually live in is not covered for those years, and the gain on that one becomes partly taxable instead. Which choice produces the better outcome depends on the two properties’ gains and dates — a registered tax agent can work it through with your figures.
What happens if the absence runs past six years?
Nothing is retrospectively undone; the exemption simply stops covering the whole gain. The gain is apportioned on a days basis under section 118-185:
taxable portion = total capital gain × (days not covered ÷ total days in the ownership period)
There is a second rule that usually applies alongside it and changes the starting point. Under section 118-192, if the dwelling was first used to produce income after 20 August 1996, and a sale immediately before that moment would have been fully exempt, you are taken to have acquired the dwelling at its market value on the day it first produced income. The reset is compulsory, not optional — it applies whether or not it suits you. Its practical effect is that growth during the years you lived there drops out of the calculation, and the apportionment runs from that deemed acquisition.
As an illustration, suppose you buy a home in July 2013 and live in it until July 2016. You then move out and rent it continuously until you sell in July 2025 — an absence of nine years.
- The absence rule covers the first six of those nine rented years. Three years are not covered.
- Because the property was first rented in July 2016, and a sale just before then would have been fully exempt, section 118-192 treats you as having acquired it at its market value in July 2016. Say that was $700,000, and you sell for $1,000,000 — a $300,000 gain to work with.
- The ownership period for apportionment is the nine years from July 2016. Three of those nine years are not covered, so roughly one third of the gain is taxable: about $100,000 before any discount or other adjustment.
Real cases turn on exact days, not whole years, and on your other income. The figures here are rounded estimates for illustration only.
How much is capital gains tax on property?
There is no separate rate for property. A net capital gain is added to your taxable income for the year and taxed at your marginal rate, so what you pay depends on your total income, not on the asset type. The current resident rates are on the ATO’s individual income tax rates page — we link them rather than reprint them, because they change.
The mechanics are the same as for any CGT asset: capital proceeds minus your cost base gives the gain, holding for more than 12 months currently brings in the 50% discount, and the main-residence rules above then determine how much of the gain is exempt. Our capital gains tax calculator will estimate an investment property, and deliberately refuses main-residence cases — see below.
Is there a separate capital gains tax in NSW, Queensland or Victoria?
No. Capital gains tax is federal. It is part of Commonwealth income tax law and works identically in every state and territory — there is no NSW CGT rate, no Queensland CGT rate and no Victorian CGT rate, and searching for a “CGT calculator NSW” will not turn up a different set of numbers.
What is state-based on property is stamp duty (transfer duty) and land tax, which differ by state and are separate taxes from CGT. Land tax and rates are also relevant to the cost base in a narrow way: costs you have already claimed as a tax deduction cannot be included in it.
Foreign residents and the main residence exemption
If you are a foreign resident for tax purposes at the time you sell, the main residence exemption is generally not available at all — including the absence rule described here. The exclusion was enacted in December 2019 and has applied to disposals from 1 July 2020. Narrow “life events” exceptions exist for people who have been foreign residents for six years or less. Expat cases turn on residency status at the date of the CGT event, so they are worth confirming with a registered tax agent before relying on anything on this page.
Does the 2027 CGT reform change the 6-year rule?
The reform that takes effect on 1 July 2027 — law since royal assent on 26 June 2026 — changes how a taxable capital gain is calculated: it replaces the 50% discount with cost-base indexation for resident individuals and trusts, adds a 30% minimum rate on net capital gains, and re-values assets through a one-off deemed disposal. Full detail is in our guide to the 2027 CGT changes for investors.
It does not rewrite the main residence exemption. The exemption and the absence rule sit in Subdivision 118-B, which the reform Act does not amend; the Act refers to that Subdivision only to exclude main-residence days when working out what counts as a “residential capital gain”. So the question of how much of your gain is exempt is answered by the same rules as before — the reform changes how the taxable remainder is worked out once you sell.
Why the Crowdfolio calculator will not estimate this
Our CGT calculator has a property mode, and it asks one question before it will produce a number: has this property ever been your main residence — or your spouse’s — even briefly? If the answer is yes, it stops and shows you nothing.
That is deliberate. As the sections above show, the answer depends on the dates of each absence, which property you nominate for which period, whether a market-value reset applied when it was first rented, and your residency at the date of sale. A tool that guessed at those would hand most people in that position a confident number that is wrong. We would rather point you at the ATO’s material and a registered tax agent, who can do it properly with your dates in front of them.
If the property has only ever been an investment — never lived in by you or your spouse, not inherited — then property mode will estimate it.
Frequently asked questions
What is the CGT 6-year rule?
It is the absence rule in section 118-145 of the Income Tax Assessment Act 1997. After you move out of your home, you can choose to keep treating it as your main residence for CGT purposes for up to six years while it is rented out, so the gain over that period can stay exempt. If it earns no income while you are away, the choice is not limited to six years.
Does the 6-year rule reset if I move back in?
Yes. The six years apply per period of absence. If you re-establish the dwelling as your main residence and later move out again, a fresh six-year period is available for the new absence. The law sets no minimum re-occupation time; whether the dwelling genuinely became your main residence again is a question of fact.
Can I claim two properties as my main residence at once?
No — only one dwelling at a time, apart from a limited six-month overlap while you are moving house. If you use the absence rule on a former home, the home you are living in is not covered as your main residence for those same years.
How much is capital gains tax on property in Australia?
There is no separate property rate. A net capital gain is added to your taxable income and taxed at your marginal rate, so the amount depends on your total income for the year. Current rates are on the ATO’s individual income tax rates page. Holding an asset for more than 12 months currently brings in the 50% CGT discount, and main-residence rules may exempt part or all of the gain.
Is there a separate capital gains tax in NSW?
No. CGT is a federal tax and is the same in every state and territory. State governments charge stamp duty and land tax on property, which are separate taxes and do differ by state.
What happens if I rent out my former home for more than six years?
The gain is apportioned on a days basis under section 118-185 — the portion of the ownership period not covered by the exemption becomes taxable. Where the dwelling was first used to produce income after 20 August 1996 and would have been fully exempt at that moment, section 118-192 also treats you as having acquired it at its market value on that date, which is compulsory rather than optional.
Can I use the 6-year rule if I now live overseas?
Generally no. Foreign residents at the time of the CGT event have been excluded from the main residence exemption since the 2019 amendments, for disposals from 1 July 2020, with narrow life-event exceptions. Residency at the date of sale is what matters, so expat cases should be confirmed with a registered tax agent.
This article is general, factual information for Australian residents. It is not financial or tax advice and does not take your circumstances into account. Main-residence CGT depends on exact dates and on choices you make when you lodge — confirm your position with the ATO or a registered tax agent before acting.
If the property has only ever been an investment, our capital gains tax calculator will estimate the CGT on the gain, and our guide to the 2027 CGT changes covers what changes from 1 July 2027.