Mawer Money with Greg Mawer: Treating former home as main residence.
- Jo Eaton
- Nov 29, 2023
- 2 min read
Treating former home as main residence
How it works
Your main residence (your home) is generally exempt from CGT.
Usually, a property stops being your main residence when you stop living in it. However, for CGT purposes you can continue treating a property as your main residence:
for up to 6 years if you used it to produce income, such as rent (sometimes called the '6-year rule')
indefinitely if you didn't use it to produce income.
During the time that you treat the property as your main residence after you stop living in it:
It continues to be exempt from CGT (the same as if you were still living in it, even if you start renting it out after you leave).
You can't treat any other property as your main residence (except for up to 6 months if you are moving house).
Eligibility
The property must have:
been your main residence first – you can't apply the main residence exemption to a period before a property first becomes your main residence (for example, if you rented out your home before you lived in it, the main residence exemption doesn't apply to the period you rented out your home)
stopped being your actual main residence – that is, you stopped living in it.
If the property was continuously your main residence, the usual rules for the main residence exemption apply. This means if you use it to produce income, such as rent, you will be entitled to only a partial main residence exemption from CGT.
If you are a foreign resident when a CGT event happens to your residential property in Australia (for example, you sell it), you aren't entitled to claim the main residence exemption.
When and how to make the choice
You choose to treat a property as your main residence in the income year a CGT event happens to the property when preparing your tax return – for example, the year you sell it based on the contract sale date, not the settlement date.
You may own both the property:
you choose to treat as your main residence when you no longer live in it
you actually lived in.
In this case, you make the choice in the income year you first sell one of those properties.
Accumulate Accountants + Business Advisors is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.
Contact: Greg Mawer
(08) 9364 4204
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