How long can you rent out your home and keep the CGT exemption?
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Up to 6 years in one absence. If you move out of your home and use it to earn income, such as renting it out, you can choose to keep treating it as your main residence for up to 6 years.
A sale in that time can be fully exempt from capital gains tax if nothing else limits the exemption. A home that earns no income can be treated this way for as long as you like.
The rule is section 118-145 of the Income Tax Assessment Act 1997, and the 2026 tax reform Acts do not change it. This is the law as read on 17 October 2026.
How does the 6 years work?
The home must first have been your main residence. You then choose to keep treating it that way while it earns income, rented or available for rent, for up to 6 years in that one absence.
The ATO says it does not matter if the 6 years is broken. In its example, a home is rented for 3 years, then vacant and not for rent for 2, which do not count. Its treating a former home as your main residence page sets this out.
Some things can still leave a taxable part. If you used part of the home to earn income before you moved out, the choice does not cover that part. A foreign resident at the time of the sale generally gets no main residence exemption.
Can I get another 6 years?
Yes, each time the home again becomes your main residence and then stops being it. You need to move back in and live there as your main residence.
Ending a lease or leaving it empty is not enough. The law sets no minimum number of months for the stay.
Can I claim two homes at once?
No. While you use the 6 year choice, you cannot treat another home as your main residence. The 3 months test below belongs to changing homes, not to the 6 year choice.
The one exception is when you change homes, where both can count for up to 6 months, ending when you sell the old one. The new home must become your main residence.
The exception needs the old home to have been your main residence for a continuous period of at least 3 months in the 12 months before the sale, with no income-earning use in any part of that year when it was not your main residence.
What happens if I sell after 6 years?
The earlier period is not lost. The ATO says that if you use a former home to produce income for more than 6 years in one absence, it is subject to capital gains tax for the period after the 6 year limit.
For an ordinary whole home, the tax is on a share of the gain set by the days outside the exemption. The home is not valued again at the end of year 6.
Does renting it out change the cost base?
It can. If you first used the home to earn income after 7:30 pm on 20 August 1996, and a sale just before that first use would have been fully exempt, you are taken to have bought the home at its market value on that day (section 118-192).
The gain is worked from that value and date, plus allowable costs since, not from what you paid. It does not apply if the sale is fully exempt under the 6 year choice.
A written valuation on the day it first earned income is worth having on file.
What should I keep?
- The dates you lived in the home, moved out, first advertised it and first rented it.
- A written market valuation on the day it first earned income.
- Leases, rent records, and the months it was vacant and not for rent.
- The contract date of the sale, which fixes the year of the gain.
The capital gains tax calculator works a sale from those dates, and the post on selling follows the sale through to the cash.