The CGT six-year rule

What the rule actually says

Moved out and rented your home? It can stay exempt for six years of renting, a fresh six years each time you move back in, and without limit while it sits empty. Enter what you did with it, year by year, and the calculator above shows how much of the gain is left taxable, counted in days as the ATO counts it.

Section 118-145 of the Income Tax Assessment Act lets you keep treating a former home as your main residence after you move out. It has three sentences that matter, and the second is the one most people have never heard:

• Six years while it earns income. Rent it out, or make it available for rent, and the cover lasts up to six years.
• A fresh six years every time. The Act gives you “another maximum period of 6 years each time the dwelling again becomes and ceases to be your main residence”.
• Indefinitely while it earns nothing. Left empty, or lent to family rent-free, it can stay your main residence without limit.

So the six years is not six years from moving out. It is six years of renting within one absence, and empty time in between does not use any of it up.

Moving back in resets the clock

On the example above, renting from mid-2016 to the sale ten years later runs four years past the limit, and 40.5% of the gain is taxable. Change one thing: move back in for a year from January 2020 before renting it out again. Each absence is now under six years, and the taxable part falls from $140,128 to $0.

No minimum stay is set: the ATO’s guide says so in terms. But the move has to make it your main residence again, and to be your main residence, the ATO says, you must have lived in it.

When six years runs out, it is worked in days

Past the limit the gain is split, not lost. The taxable share is the days the property was not your main residence, divided by the days you owned it. The ATO’s own worked example: a home first rented on 29 September 1999 and sold on 29 September 2024, with a $320,000 gain.

The calculator reproduces that to the dollar. The ATO is not perfectly consistent with itself: in another of its examples it counts the six years one day shorter, which on that example’s facts is worth about $22. Days are counted from the day ownership starts to the day it ends, both included.

The rule that replaces what you paid

If the home was fully exempt until it was first rented, and renting it means only part of the gain is now exempt, section 118-192 treats you as having bought it again that day at its market value. The years you lived there drop out of the sum, and the price you originally paid stops mattering. It is not optional. It does not apply when the six-year rule leaves the home fully exempt, because there is then no gain to apportion, and it applies only where the income first began after 7.30 pm on 20 August 1996.

That is why the calculator asks for a valuation from the day it was first rented. If you did not get one at the time, a valuer may be able to value it as at that day.

Who cannot use it

• Anyone who never lived there. The rule applies only to a dwelling that was your main residence first.
• Anyone claiming another home for the same days, apart from up to six months of overlap when moving.
• Most people selling as foreign residents, unless they pass the life events test.
• Part of a home earning income while you lived in it — a rented room, say — is never covered for that part.

Did the 2026 reform change it?

No. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 does not amend the main residence rules. What it changes is the tax on whatever part of a gain is taxable: for sales from 1 July 2027 the 50% discount is replaced by indexation, as our guide to the 2027 changes explains.

One amendment does meet this page. The market-value reset above treats your home as bought again the day it is first rented, and that could have looked like a purchase after Budget night for the new negative gearing rules. Section 26-155(3AA), added by the Tax Reform No. 2 Act from 1 October 2026, says to disregard it: a home you owned before 12 May 2026 and first rent out later keeps its rental loss deductible against your salary.