Updated 10 October 2026
The six-year rule reads simply and applies messily. These four worked scenarios cover the situations that actually land on accountants' desks: a sale inside the window, an absence that runs long, two properties competing for one exemption, and the expat who sells at the wrong moment. Each one turns on a date and a market value; the arithmetic follows.
At a glance
- Four worked scenarios: selling within six years, exceeding six years, buying a second home, and moving back in
- Selling inside the window with the choice made can keep the gain fully exempt
- Beyond six years, the taxable share is measured from the section 118-192 reset value
- Claiming a new home as your main residence starts CGT exposure on the old one
- Genuine reoccupation restarts a fresh six-year period for the next absence
In this guide
The rules in one paragraph
Move out of a home you genuinely lived in and section 118-145 lets you keep treating it as your main residence for up to six years per absence while it earns rent, at the cost of the exemption on any other dwelling for the same period. The day it first earns rent, section 118-192 usually resets its cost base to market value. And if you are a foreign resident when you sell, the exemption is generally gone regardless. The full mechanics are in our six-year rule guide and section 118-192 guide; what follows is the arithmetic. All figures are illustrative and ignore incidental costs, discount, indexation and the 2027 regime split unless noted.
Scenario 1: sold inside six years
Priya buys in 2019 for $520,000, lives there until 2023, then rents it out when she relocates for work. She does not buy elsewhere. She sells in 2028, five years into the absence, for $890,000.
She makes the section 118-145 choice in her 2028-29 return. The absence is under six years, no other property claimed the exemption, so the dwelling is treated as her main residence throughout. Capital gain: nil. The $815,000-equivalent reset valuation she obtained in 2023 is never used, and that is the point: it was insurance against the scenarios below, which she could not rule out in 2023.
Scenario 2: the eight-year absence
Same facts, but Priya sells in 2031, eight years into the absence, for $980,000. Her 2023 valuation at the first rental date supported $700,000.
- Cost base resets to $700,000 under section 118-192. Total post-reset gain: $280,000 over eight rental years.
- The six-year choice exempts six of the eight years. Taxable proportion: two-eighths.
- Assessable gain before concessions: $70,000, with the pre and post 1 July 2027 slices of it split at the property's market value on that date under the enacted reform.
Without the 2023 valuation, the entire calculation hangs on reconstructing a 2023 value in 2031. Without the six-year choice, the taxable fraction would have been eight-eighths.
Scenario 3: two properties, one exemption
Marco moves out of his home in 2024 (value at first rental, per valuation: $760,000, original cost $450,000) and buys a new home the same year. Both properties grow. In 2030 he sells the old property for $940,000.
Marco now chooses which dwelling the exemption covers for the 2024 to 2030 period, and he can make the choice with hindsight in his 2030-31 return:
- Cover the old property: its $180,000 post-reset gain is exempt, but his new home accrues six taxable years that will bite when it is eventually sold, measured against its value history.
- Cover the new home: the old property's gain is taxable from the $760,000 reset value, six of six years, roughly $180,000 assessable before concessions, and the new home stays clean.
The right answer depends on which property gained more and how long the new home will be held. What makes the choice calculable at all is having values for both properties at 2024. One property without a valuation makes it a guess.
Scenario 4: the expat sale
Lin moves to Singapore in 2022, rents out her Adelaide home (reset value per valuation: $680,000, original cost $390,000) and remains an Australian property investor but becomes a foreign resident for tax purposes. In 2027, five years in and comfortably inside the six-year window, she signs a contract to sell for $850,000 while still a foreign resident.
The six-year rule does not save her. Because she is a foreign resident at the time of the CGT event, the main residence exemption is denied entirely under the rules applying to CGT events after 30 June 2020, no life event applying. Her gain runs from the $680,000 reset value with no exemption for any period, and the years she lived in the house count for nothing. Had she sold after re-establishing Australian tax residency, or before departing, the outcome flips to fully or largely exempt. Same house, same dates, six-figure difference, decided by residency status on contract day.
Penalty risk
Expats: test residency before signingThe exemption is assessed at the moment of the CGT event, which for a sale is the contract date, not settlement. An expat weeks away from resuming Australian residency can destroy the exemption by signing early. Get advice on the residency position first, then list.
Each of these scenarios changes again after 1 July 2027, when the CGT discount changes replace the 50 per cent discount with indexation for the post-reset slice. The capital gains tax calculator shows that split for a property held across the date.
Which scenario are you in?
Whatever the answer, it runs on a market value at a date. Reports signed by a Chartered Accountant and Certified Property Valuer. $297 residential, incl GST, any date past or present, 24 to 48 hours, Australia-wide.
Start your orderHow it worksThe pattern across all four
Every scenario resolves into three inputs: the date income use began, the market value on that date, and the days covered by a choice. The dates come from leases and agent records. The choice is made with hindsight. The market value is the only input that degrades with time, which is why the valuation at the rental start date, $297 and 24 to 48 hours, is the one move that improves every ending, including the endings where it turns out not to be needed. A retrospective valuation repairs a missed date; a contemporaneous one never needs repairing.
Common questions
How is the taxable gain calculated after six years?
The cost base resets to market value at the first income date under section 118-192, and the gain from that value is apportioned: days not covered by the main residence treatment over total days from the reset. Six exempt years in an eight-year absence leaves two-eighths of the post-reset gain assessable before concessions.
When do I have to decide which property gets the exemption?
In the tax return for the year the CGT event happens, which means you decide with hindsight. You can wait to see which property gained more before committing the exemption, provided you have the values to compare.
Does the six-year rule protect expats?
Not if you are a foreign resident when the CGT event occurs. For events after 30 June 2020 the main residence exemption, six-year rule included, is generally denied to foreign residents unless a limited life-event exception applies. Residency at the contract date decides it.
Do I need the valuation even if I plan to sell within six years?
Yes, as insurance. Plans change: absences run long, new homes get bought, residency shifts. The valuation at the rental start date costs $297 and preserves the best outcome in every scenario; skipping it only pays off if nothing ever deviates from plan.
