If you’ve sold property recently, it’s worth being aware of the capital gains tax (CGT) rules around the main residence exemption. While this exemption can reduce or eliminate CGT on the sale of your home, eligibility depends on several factors, and the rules can be complex.
What Is the Main Residence Exemption?
The main residence exemption may apply when you sell a property that was genuinely used as your home. This typically includes properties where you lived, kept your belongings, and received mail. However, not all properties qualify – vacant land, for example, is excluded from the exemption.
Key Considerations
- Six-Year Rule: If you moved out and rented the property, you may still be able to treat it as your main residence for up to six years – provided it was your home before being rented.
- Partial Use: If the property was used to generate income (such as being rented or used for business), only part of the gain may be exempt.
- Foreign Residency: If you were not an Australian resident for tax purposes during ownership or at the time of sale, different rules may apply.
Common Scenarios
Some situations that may affect eligibility include:
- Renting out your home after living in it
- Using part of your home for business
- Owning multiple properties
- Selling a property that was never lived in
What You Can Do
If you’re unsure whether your property sale qualifies for the main residence exemption, it may be helpful to review your property history, check relevant ATO guidance, or speak with a qualified tax professional.
