The Six-Year CGT Absence Rule in Australia

The six-year CGT absence rule allows you to maintain the main residence CGT exemption on your home for up to six years while you are not living there — even if you rent it out. If you sell within that six-year window, the sale may be fully CGT-free.

How the Six-Year Absence Rule Works

When you move out of your main residence and start renting it out (or simply leave it vacant), you can elect to continue treating it as your main residence for CGT purposes for up to six years. If you sell before the six years expires, the full main residence exemption applies and no CGT is payable.

Key Conditions

The property must have been your main residence before you moved out (you cannot apply the rule to a property you never lived in)
You must not simultaneously treat another property as your main residence for the same period (you can only have one main residence at a time)
The absence must not exceed six years per continuous absence
You do not need to formally elect — the rule applies automatically if the conditions are met when you sell

The Six-Year Clock Resets

If you move back in to the property as your main residence, the six-year clock resets. This means you can potentially rent out the property repeatedly for up to six years at a time, indefinitely, and maintain the exemption throughout — as long as you move back in between each rental period.

Example timeline:

2012–2015: Live in property as main residence
2015–2020: Rent it out (5 years — within 6-year limit)
2020–2022: Move back in
2022–2028: Rent it out again (6 years — within new limit)
2028: Sell — still within the reset six-year window

What Happens If You Exceed Six Years?

If the property is rented out for more than six years continuously, the exemption only covers the six-year period. A partial CGT exemption applies for the period beyond six years.

Example:

Owned for 12 years
Lived in as main residence: 3 years
Rented out: 9 years (3 years exempt under six-year rule, 3 years not exempt)
Fraction not exempt: 3 ÷ 12 = 25% of the capital gain is taxable

The Interaction With Another Main Residence

During the absence, you cannot also claim the main residence exemption on another property you own. If you move interstate and buy a new home, you must choose which property is your main residence for each period. Once another property becomes your main residence, the six-year clock on the original home stops and the partial exemption calculation begins.

Renting Out vs Leaving Vacant

The six-year rule applies whether you rent the property out or leave it vacant. There is no requirement to earn income from it.

Record-Keeping

To support a claim under the six-year absence rule, retain:

Evidence of when you moved out (change of address with ATO, electoral roll, etc.)
Lease agreements showing rental periods
Evidence of when you moved back in (if applicable)
Evidence that no other property was treated as your main residence during the same period

Frequently Asked Questions

Can I rent out my home for 6 years and pay no CGT when I sell? If the property was previously your main residence, you may be able to apply the six-year absence rule and sell CGT-free — provided you haven’t simultaneously treated another property as your main residence.

Does the six-year rule apply to investment properties I have never lived in? No. You must have lived in the property as your main residence before moving out. The rule does not apply to properties that were always investment properties.

What if I have been absent for 7 years? The six-year exemption covers the first six years. The additional one year is not covered, and a partial CGT exemption applies. The taxable portion is calculated based on the proportion of time not covered by the exemption.

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.