Main residence exemption
The rule that generally frees your family home from capital gains tax when you sell it.
Australia does not tax the capital gain on your main residence. This is the single largest tax concession available to households and a major reason home ownership is so central to Australian wealth.
To qualify, the dwelling must genuinely be your home — you lived in it, kept your belongings there, received mail there, and it was where your family resided. Land up to two hectares is generally covered along with the dwelling.
The exemption can be partial. If you rented the property out for part of your ownership, or used part of it to produce income, only a proportion of the gain is exempt and the rest is taxable.
What the exemption is worth
A home bought for $500,000 and sold for $900,000 produces a $400,000 gain. Fully exempt, the tax is nil. Without the exemption, $200,000 would be added to your income after the CGT discount.
The bit people get wrong
Running a business from home or claiming occupancy costs such as mortgage interest can jeopardise part of the exemption. Claiming a home office deduction based on floor area is the classic way people unknowingly create a future CGT liability.
Common questions
Can I have two main residences?
Only for a limited overlap period when moving between homes, generally up to six months. Otherwise you must nominate one property as your main residence at any given time.
What happens if I rent out my home?
The six-year rule may keep it fully exempt if you do not nominate another main residence. Beyond that, the exemption is apportioned across your ownership period.
Does the exemption apply if I move overseas?
Foreign residents at the time of sale generally lose access to the exemption entirely, even for years when the property genuinely was their home. This rule has caught many expatriates by surprise.
Run your own numbers
Related terms
Source: Australian Taxation Office