In short
- You can move out of your home and, for capital gains tax, keep treating it as your main residence for a time.
- If you rent it out, that can last up to six years. If you leave it empty, there is no time limit.
- While you do, no other home can be your main residence, apart from up to six months when you are moving house.
- The six years start again each time you move back in and make it your home once more.
The question behind the move
You may be moving closer to the grandchildren, heading for the coast, setting off to travel, or moving into care. The family home holds a lot, and selling it can feel too final. So you ask: can we keep it, rent it out, and still sell it later without tax on the gain?
For many people the answer is yes, for a time. The rule that allows it is often called the six-year rule. Here is how it works, in plain words.
Your home, and capital gains tax
When you sell the home you live in, the gain is usually free of capital gains tax. The tax office calls that home your main residence.
Moving out does not have to end that. You can choose to keep treating the old home as your main residence after you leave.
Renting it out, or leaving it empty
What you do with the home while you are away decides how long the choice can last.
| While you are away | How long it can stay your main residence |
|---|---|
| Rented out | Up to 6 years |
| Left empty | No time limit |
| Back home, then away again | The 6 years start again |
Said simply: if the home earns rent, it can stay your main residence for up to six years. If it earns nothing, there is no limit. And if you move back in and make it your home again, then leave once more, a fresh six years begins.
One home at a time
There is a catch to plan around. While you treat the old home as your main residence, no other property can be your main residence.
That matters if you buy a new place to live in. You cannot have both as your main residence, except for up to six months while you are moving house. That six-month overlap only works if you lived in the old home for at least three months in a row in the last 12 months before you sold it, and did not use it to earn income in that time.
So if you are buying a new home, think early about which one you want the rule to cover.
If you retire overseas
Some retirees move abroad. If you are a foreign resident for tax when the home is sold, generally when the sale contract is signed, you generally cannot claim the main residence exemption, apart from narrow life-events exceptions. The six-year rule does not help in that case. If you are thinking of retiring overseas, talk to your accountant about the timing of any sale before you go.
What this page does not settle yet
Two questions sit outside the rule itself.
First, if you are away for more than six years and the home is rented the whole time, part of the gain may become taxable.
Second, the age pension. How a former home is counted once you move out, and whether rent from it changes your pension, follows its own rules. Our page on the age pension and investment property covers the assets test.
The rent itself is income. How rent is taxed in retirement is set out on our page on whether retirees pay tax on rental income.
A simple way to plan it
Before you move, it helps to write down three things. When you plan to leave. Whether the home will be rented or left empty. And whether you will buy another home to live in.
Those three answers tell you, and your accountant, how the rule can work for you.
My view
In my view, the people who handle this well make the decision before they move, not after the first tax return. You may see it differently, and that’s fine.
One easy next step
If you would like the retirement lessons in order, from income to the family home, the free lessons by email walk through each one in plain words. All you need is your first name and email, and to choose Retirement.
Education only, not personal or financial advice.