The six-year rule: treating a former home as your main residence for CGT

Under the CGT absence rule in section 118-145 of the Income Tax Assessment Act 1997 — commonly called the six-year rule — you can choose to keep treating a former home as your main residence after you move out: for up to six years while it is used to produce income such as rent, or indefinitely if it is not. The trade-off is that you generally cannot treat any other property as your main residence for the same period (apart from up to six months when moving house), and exceeding the six-year limit, or being a foreign resident when you sell, changes the outcome significantly.

Key points:
- The six-year rule is a **choice**, not automatic: you can keep treating a former home as your CGT-exempt main residence for up to six years while it produces income such as rent, and indefinitely if it does not, per [ATO guidance](https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/property-and-capital-gains-tax/your-main-residence-home/treating-former-home-as-main-residence) updated 22 June 2026.
- You can only have one main residence at a time — making the choice for the former home means the home you actually live in is not exempt for the same period, apart from an overlap of up to six months when you are moving house.
- The six-year limit applies separately to **each period of absence**: genuinely re-establish the home as your main residence and a fresh six years is available when you next move out. Within one absence, only income-producing time counts toward the cap — vacant periods are unlimited.
- Exceed six years of income use in one absence and a partial exemption applies: the cost base resets to the home’s market value when it first earned income, the gain is apportioned by days over the limit, and the 50% CGT discount can reduce the assessable gain for Tax Time 2026.
- The rule cannot cover any period before the property first became your main residence, and any part of the home used to produce income before you moved out stays outside the exemption.
- Foreign residents at the time of the CGT event generally get **no** main residence exemption for disposals after 30 June 2020 — not even a partial one — unless they satisfy the life events test.
- The [Treasury Laws Amendment (Tax Reform No. 1) Act 2026](https://www.legislation.gov.au/C2026A00049/asmade) is law, and it **does not change the main residence exemption or the six-year rule**. It restructures the [CGT discount](/technical-resources/glossary#cgt-discount) for CGT events happening on or after 1 July 2027 — 0% for resident individuals and non-superannuation trusts on ordinary assets, with cost-base indexation available instead. The discount is not abolished, and the 50% discount still applies to CGT events happening before 1 July 2027.