Main Residence Exemption

Definition

The main residence exemption (also called the principal place of residence or PPOR exemption) provides a full CGT exemption when you sell the home you live in, provided it has been your main residence for the entire ownership period, you haven't used it to produce income, and the land is under 2 hectares. Partial exemptions apply when only some conditions are met.

This is the biggest tax concession most Australians will ever receive. A $300,000 gain on your home is completely tax-free. The exemption gets complicated when a home is rented out (see the 6-year rule), used partly for business, or when there's an 'absence' period. Getting the classification right at acquisition is crucial.

You buy your home for $450,000 in 2015, live in it continuously, and sell for $780,000 in 2026. The $330,000 gain is entirely exempt from CGT. You pay zero tax on the sale.

ITAA 1997, Subdivision 118-B

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