The main residence exemption disregards the capital gain on your home where four conditions hold: the dwelling was your main residence for the whole ownership period, it was not used to produce income, the land is two hectares or less, and you are an Australian resident for tax purposes at the time of sale. Failing any of them gives a partial exemption rather than none, apportioned on the days the dwelling was not your main residence against the total days owned. Only one dwelling can be a main residence at a time, with a six-month overlap allowed when moving house.
Last reviewed 3 September 2026.
Four conditions, not two
The main residence exemption is why most people never meet capital gains tax. Sell the home you live in and the gain is generally disregarded entirely.
A full exemption depends on four things at once. The dwelling was your home for the whole of the period you owned it. It was not used to produce income. The land it sits on is two hectares or less, including the land under the house. And you were an Australian resident for tax purposes when you sold.
Most explanations state the first two and stop. The other two are where real claims fail. A rural block over two hectares gets an exemption for the dwelling and up to two hectares only, and the balance is taxed. A foreign resident generally cannot claim the exemption at all, however long the property was their home.
Fail any of the four and you do not lose everything. You move from a full exemption to a partial one, which is a calculation rather than a refusal.
One main residence at a time, with one six-month overlap
You can only have one main residence for the exemption at any given time. A couple is treated as one household for this, so spouses cannot each nominate a different property and exempt both.
There is a practical concession for moving. Where you buy a new home before selling the old one, both can be treated as your main residence for up to six months, provided the old one was your main residence for a continuous three months in the twelve months before the sale and was not producing income in that time.
Beyond six months, you have to choose which property the exemption applies to, and the other becomes partly taxable for the overlap.
Couples who each owned a home before moving in together hit this most often, and the choice is worth modelling rather than defaulting.
Renting out any part of it changes the calculation
Producing income from the dwelling is the condition people breach without meaning to. Letting a room, taking in a boarder on a commercial basis, or running a business from a dedicated part of the house all reduce the exemption.
The reduction is worked out on the proportion of floor area used to produce income and the proportion of the ownership period it was so used. Rent out a third of the house for half the time you owned it and roughly a sixth of the gain becomes assessable.
There is a rule that catches people badly here. Where you first use your home to produce income after 20 August 1996, you are generally taken to have acquired the dwelling at its market value at the time you first used it that way. That resets your cost base, and it can be a good outcome or a poor one depending on what the market did before that date.
Working from home on a laptop at the kitchen table is not what this is about. It is about a part of the house set aside for income production.
Moving out without losing it
Leaving your home does not automatically end the exemption. You can choose to continue treating a dwelling as your main residence after you stop living in it.
If it is not producing income while you are away, that choice can run indefinitely. If it is producing income, the choice is limited to six years at a time, and the clock resets if you move back in.
That six-year limit is the single most useful provision in this area for anyone who becomes an investor by accident, and it has its own page: see the CGT six-year rule for how the period is measured and what happens when it runs out.
Making the choice has a cost. While a former home is treated as your main residence, no other dwelling can be, so a property you buy in the meantime is not exempt for that period. It is a choice between two properties, not a way to have both.
What a partial exemption actually looks like
Where the exemption is partial, the assessable share of the gain is generally worked out on the number of days the dwelling was not your main residence against the total days you owned it.
So a property owned for twenty years and used as a home for fifteen has roughly a quarter of its gain exposed, before the discount and before any cost base adjustments.
This is why dates matter more than anything else in this area. The apportionment is arithmetic on days, and it depends on records most people do not keep: when you moved in, when you moved out, when it was first let, when you moved back.
Keep the dates and the documents. A partial exemption is entirely reconstructable from good records and close to indefensible without them.
Common questions
It is the rule that keeps the family home out of capital gains tax. Where a dwelling was your home for the whole period you owned it, was not used to produce income, sits on two hectares of land or less, and you are an Australian resident for tax purposes when you sell, the capital gain is generally disregarded in full. If any of those conditions is not met for the whole period, the exemption becomes partial rather than disappearing.
No. Only one dwelling can be a main residence at any given time, and spouses are treated as one household for this purpose, so a couple cannot nominate a different property each and exempt both. There is a six-month concession when moving, where a new home and an old one can both be treated as your main residence, provided the old one was your main residence for a continuous three months in the twelve months before the sale and was not producing income in that time.
Yes. Using part of the dwelling to produce income reduces the exemption in proportion to the floor area used and the share of the ownership period it was used that way. There is also a reset to watch: where you first use your home to produce income after 20 August 1996, you are generally taken to have acquired it at its market value at that time, which replaces your original cost base. Ordinary working from home, without a part of the house set aside for income production, is not caught by this.
Up to two hectares, including the land under the dwelling. On a larger holding the exemption covers the dwelling and up to two hectares of adjacent land used primarily for private purposes, and the gain attributable to the balance is assessable. Where the land is larger, you can generally choose which two hectares the exemption applies to, which is worth doing deliberately rather than by default because the choice affects the apportionment.
Generally no. A person who is a foreign resident for tax purposes at the time of the sale cannot access the main residence exemption, regardless of how long the property was genuinely their home or how much of the ownership period they spent in Australia. Residency is tested at the time of the CGT event, which is the contract date, so the timing of a sale relative to a move overseas can decide the outcome entirely. Limited life-events relief exists in specific circumstances, so take advice before selling from overseas.
Where to next
- The CGT six-year rule, for a former home that is let/cgt-six-year-rule
- Capital gains tax on inherited property/capital-gains-tax-inherited-property
- Capital gains tax calculator/capital-gains-tax-calculator
- Capital gains tax on Queensland investment property/capital-gains-tax-investment-property-queensland
- Rentvesting, where this exemption is the trade-off/rentvesting
- Investment property tax deductions/investment-property-tax-deductions
- Land tax on investment property/land-tax-investment-property-queensland
- Stamp duty on investment property/stamp-duty-investment-property-queensland
- Depreciation schedules/investment-property-depreciation-schedule
- Building and pest inspection cost/building-and-pest-inspection-cost-queensland
General information only. This page doesn't consider your personal circumstances and isn't financial, tax, credit or legal advice, so get licensed advice on your own position before you sell. The main residence exemption is fact-dependent and turns on dates, use and residency, so a partial exemption calculation is work for your accountant against your own records. This page does not cover dwellings held in a company, trust or self managed super fund, land larger than two hectares in detail, dwellings used for a business, deceased estates, or the life-events relief available to some foreign residents. The exemption conditions, the two hectare limit, the six-month rule for moving, the market value rule when a home is first used to produce income and the foreign resident restriction come from Australian Taxation Office guidance on the main residence exemption, read on 3 September 2026. FAA Property Pty Ltd holds QLD OFT real estate licence 4220395. FAA Property earns a commission from builders and developers when a property purchase proceeds. The strategy session itself costs you nothing. Because we're paid by the supply side, you should weigh our recommendations with that in mind. Financial advice and credit sit with other FAA Group companies, which are authorised representatives of Lifespan Financial Planning Pty Ltd, AFSL 229892. FAA doesn't lend money.