6-Year Rule (Absence Rule)

Definition

Under Section 118-145 of the ITAA 1997, if you move out of your main residence and rent it, you can continue to treat it as your main residence for up to 6 years for CGT purposes — meaning no CGT on sale. If you don't rent it out, the exemption is unlimited. The rule resets if you move back in for any period. You can only have one main residence at a time.

The 6-year rule turns 'accidental landlords' into strategic tax planners. Move out for work, rent it out, sell within 6 years — no CGT. It's one of the most powerful tax concessions for property owners. Three things break it: nominating another property as your main residence, exceeding 6 years while rented, or failing to actually live there first.

You live in your home for 3 years, then move interstate for work and rent it out. After 5 years of renting, you sell for a $200,000 gain. Under the 6-year rule, the entire gain is CGT-free.

ITAA 1997, Section 118-145

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