By Varun Agarwal, co-founder of PropRetire · Published · Law as read · 2 min read
Does moving into your rental before you sell it avoid CGT?
No length of time makes it fully exempt. A rental you later move into is exempt only for the days it was your home, so the days it was rented are still taxed when you sell.
What is the rule?
When a property was your main residence for only part of the time you owned it, only that part is exempt. The gain is multiplied by the days it was not your home over the days you owned it.
That is section 118-185 of the Income Tax Assessment Act 1997. The ATO's page on using your home for rental or business says the exemption is limited to the period you lived there.
Which days are counted?
In the ATO's example, Farnaz buys on 21 October 2019 and sells on 1 April 2026, which the ATO counts as 2,355 days. She rents it out, then moves in on 16 November 2021, so 757 of those days were rented.
The ATO's page counts days from the contract dates. In the law, owning starts when you become the legal owner, or earlier if the contract lets you live there first, and ends when you stop being the legal owner.
What does it look like in dollars?
She paid $449,000 and sold for $987,500, a gain of $538,500. The rented share, 757 over 2,355 of it, is $173,097, and the 50% discount leaves a net capital gain of $86,548 in her 2025-26 return.
The discount here is for a sale contracted before 1 July 2027, and what changes from 1 July 2027 sets out the change. The capital gains tax calculator works out a whole gain from a price and two dates, before any split like this.
Does its value on the day you move in count?
No. The gain runs from what you paid, and the days split it. A value on the day you move in is not used.
The market value rule in section 118-192 is for the other way round, a home that was fully exempt until it was first rented out. A property that was a rental first never had that.
Is there a minimum time to live there?
No law sets one, though how long you stay and whether you mean it as your home help decide if it counts. No stay turns the rented days into home days. Each day it is your home adds to the exempt share, and the rented days stay taxed.
A home you move out of and then rent is the opposite case, with its own rule. It is in how long you can rent out your home and keep the exemption.
What should I keep?
The contract and settlement dates of the purchase and the sale, the day the last tenancy ended and the day you moved in.
Then what shows it became your home, such as your address on the roll, your licence and your bills, as each day counts only once it is.
See it for your own rentals
Thinking of selling? The loan, the costs and the tax, worked through.