Partial Main Residence CGT Exemption in Australia

If you sell a property that was your main residence for part of the time you owned it, a partial CGT exemption applies. You are only taxed on the portion of the gain that relates to the period when the property was not your main residence.

When Does a Partial Exemption Apply?

You will have a partial rather than full CGT exemption when:

You lived in the property for a period, then moved out and rented it out (and the six-year absence rule does not fully cover the rental period)
You bought the property as an investment, then later moved in as your main residence
You rented out part of the property while living in it (e.g., a granny flat or rooms via Airbnb)

How to Calculate the Partial Exemption

The standard formula for the non-exempt portion is:

Taxable portion = Non-main-residence days ÷ Total ownership days

Then apply this fraction to the gross capital gain, and apply the 50% CGT discount if the property was held for more than 12 months.

Example 1: Moved Out and Rented Beyond Six Years

Purchased: 1 January 2012
Lived in as main residence: 1 January 2012 – 31 December 2016 (5 years = 1,826 days)
Rented out: 1 January 2017 – 31 December 2024 (8 years = 2,922 days)
Six-year rule covers: 2,191 days (6 years from 1 January 2017)
Non-exempt days: 2,922 − 2,191 = 731 days
Total ownership: 1 January 2012 – 31 December 2024 = 4,748 days
Taxable fraction: 731 ÷ 4,748 = 15.4%
Capital gain: $500,000
Taxable gain: $500,000 × 15.4% = $77,000
After 50% discount: $38,500 taxable

Example 2: Bought as Investment, Later Moved In

Purchased: 1 January 2015 (as investment)
Moved in as main residence: 1 January 2019
Sold: 31 December 2024
Total ownership: 10 years (3,650 days)
Non-main-residence days: 4 years (1,461 days)
Main-residence days: 6 years (2,189 days)
Taxable fraction: 1,461 ÷ 3,650 = 40%
Capital gain: $300,000
Taxable gain: $300,000 × 40% = $120,000
After 50% discount: $60,000 taxable

Note: When you buy a property as an investment and later move in, the cost base is not reset at the time you move in. The cost base remains the original purchase price (plus eligible costs). However, you must obtain a market valuation at the time of change of use — this may be relevant if the property is later converted back to an investment.

Partial Exemption for Rooms Rented While Living There

If you rent out part of your home (e.g., a room or granny flat) while you live there, the partial exemption works differently:

Taxable portion = Proportion of floor area used for income-producing purposes

Example:

You rent out 1 of 4 bedrooms (25% of floor area) for 5 of 10 years owned
Taxable fraction: 25% × (5 ÷ 10) = 12.5% of the capital gain

Interaction With the Six-Year Absence Rule

The six-year absence rule can reduce the non-exempt days. If the property was rented out for eight years, only the two years beyond the six-year window are non-exempt.

Frequently Asked Questions

If I lived in my home for half the time, do I pay CGT on half the gain? Roughly, yes — you pay CGT on the proportion of the gain that relates to the period it was not your main residence. The 50% discount (if held >12 months) then applies to that taxable portion.

What is the cost base when I convert an investment property to my main residence? The cost base remains the original purchase price and eligible costs — it is not reset to market value when you move in. However, you should obtain a valuation at the time of conversion for record-keeping purposes.

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.