Your main residence — the home you live in — is generally exempt from capital gains tax (CGT) when you sell it. The main residence exemption is one of the largest tax concessions available to Australians, and for most people it means the family home can be sold tax-free regardless of how much it has increased in value.
Conditions for the Full Exemption
The full CGT exemption applies to your home if all of the following conditions are met:
- The property is a dwelling (a house, apartment, unit, or similar)
- You (the taxpayer) or your associate (spouse, child under 18) lived in it throughout the entire ownership period
- The property was not used to produce assessable income at any point (e.g., not rented out, not used for a home-based business that claimed deductions for the dwelling itself)
- The land is 2 hectares or less (the exemption can apply to adjacent land up to 2 hectares)
If all conditions are met, the entire capital gain is disregarded — no CGT is payable.
What Voids or Reduces the Exemption?
The full exemption may not apply if:
- You rented the property out at any point — a partial exemption applies based on the proportion of time you lived there
- You ran a business from home and claimed the home as a business premises — the portion used exclusively for business may not qualify
- You did not move in promptly — there is a general rule that you must move in as soon as practicable after purchase (within 12 months is a guideline)
- You moved out permanently — a partial exemption applies from the date you stopped using it as your main residence (unless the six-year absence rule applies)
- You are a foreign resident at the time of sale — since 9 May 2017, foreign residents cannot access the main residence exemption in most circumstances
Only One Main Residence at a Time
You can only have one main residence at a time. If you own two properties, you must nominate which one is your main residence for any given period. Married couples and de facto partners can only have one main residence between them.
Exception — the six-month rule: If you sell your old home and buy a new home, you may be able to treat both as your main residence for up to six months (provided you lived in the old home before selling and the new home becomes your main residence as soon as practicable).
The Six-Year Absence Rule
If you move out of your home and rent it out (or simply leave it vacant), you may be able to continue treating it as your main residence for up to six years. This means the full CGT exemption can apply when you sell, even though you have been away.
Conditions:
- The property must have been your main residence before you moved out
- You must not simultaneously treat another property as your main residence
- The absence period must not exceed six years (it resets each time you move back in)
See The Six-Year CGT Absence Rule for a detailed guide.
Partial Main Residence Exemption
If the property was your main residence for only part of the ownership period, a partial exemption applies. The taxable portion is:
Non-exempt days ÷ Total days owned × Capital gain
Then apply the 50% CGT discount if held for more than 12 months.
Example:
- Owned for 10 years (3,650 days)
- Lived in as main residence: 7 years (2,555 days)
- Rented out: 3 years (1,095 days)
- Capital gain: $400,000
- Non-exempt fraction: 1,095 ÷ 3,650 = 30%
- Taxable gain before discount: $400,000 × 30% = $120,000
- After 50% discount: $60,000 taxable
The “Move In as Soon as Practicable” Rule
After you buy a home, you have up to 12 months to move in. If you have a genuine reason for the delay (renovation, lease on current home ending), the ATO may accept delays up to 12 months. Beyond 12 months, you risk losing part of the exemption.
Related Articles
- The Six-Year CGT Absence Rule
- Partial Main Residence Exemption
- CGT When You Convert Your Home to a Rental
- CGT on Investment Property
- Capital Gains Tax Australia hub
Frequently Asked Questions
Is the family home exempt from CGT in Australia? Generally yes, if it has been your main residence for the entire period of ownership and has not been used to produce income. The full exemption means no CGT is payable regardless of the size of the gain.
Can I claim the main residence exemption if I rent out a room? Renting out part of the home (such as a bedroom via Airbnb or to a housemate) may void the exemption for that portion of the property for the period it was rented. A partial exemption would apply.
What if I have never lived in the property? If you bought the property as an investment and never lived in it, you cannot claim the main residence exemption. The full capital gain is taxable.
This article provides general tax information for FY2025–26. For advice tailored to your situation, speak with a registered tax agent or accountant. Find one through the Tax Practitioners Board register.