Glossary · Australian property
Main residence exemption.
An ITAA 1997 s118-110 exemption that makes the sale of your main residence tax-free for capital gains purposes.
Under ITAA 1997 s118-110, capital gains from the sale of an Australian taxpayer's main residence are fully exempt from CGT, provided the property was the taxpayer's main residence for the entire ownership period.
If the property was your main residence for only part of the ownership period (e.g. you moved out and rented it), CGT applies on a pro-rated basis using the formula: taxable_gain = total_gain × (non-PPOR-days ÷ total-ownership-days). The 50% CGT discount for assets held over 12 months still applies.
The '6-year rule' (s118-145 'absence rule') extends the exemption for up to 6 years after moving out, provided you don't claim another property as your main residence in the same period. After 6 years, partial CGT applies.
Worked example
Bought $500K, lived in for 4 years, rented for 3 years, sold for $800K. Gain = $300K. Non-PPOR days/total days = 3/7. Taxable gain = $300K × 3/7 = $128.5K. After 50% discount, taxable amount = $64.3K.
Source
ITAA 1997 ss118-110 to 118-150.
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