The Main Residence Exemption Explained | Loyal Bright Accountants

Updated: April 2026

For most Australians, selling the family home is entirely tax-free. This is thanks to the ATO's Main Residence Exemption. However, if you rent out a room, run a business from home, or move out for a few years, the rules can get complicated.

1. What makes a property your "Main Residence"?

To claim the full exemption from Capital Gains Tax (CGT), the property must have been your home for the entire time you owned it. The ATO looks at several factors to determine this, including:

You and your family live in the property.
Your personal belongings are kept there.
It is your registered address on the electoral roll and for your mail.
Services like gas, electricity, and the internet are connected in your name.

2. The "6-Year Rule"

What happens if you move interstate for work and decide to rent out your family home? The ATO has a generous concession known as the "6-Year Rule."

Treating a former home as your main residence

If you move out of your main residence, you can continue to treat it as your main residence for CGT purposes for up to 6 years while it is rented out. If you sell it within those 6 years, it remains completely tax-free. However, you cannot claim any other property as your main residence during that same period.

3. Running a Business from Home

If you use part of your home to run a business (e.g., a doctor's surgery, a hair salon, or a dedicated workshop) and you claim "occupancy expenses" like mortgage interest or council rates on your tax return, you will likely lose a portion of your Main Residence Exemption.

When you sell the house, you will have to pay CGT on the percentage of the home that was used for the business. (Note: Simply having a home office where you work on a laptop usually does not trigger this, provided you don't claim occupancy expenses).

Home Business CGT Impact Estimator

Use the sliders below to see how running a business from home impacts your tax-free exemption when you sell the property.

Total Capital Gain on Sale: $400,000

Percentage of Home Used Exclusively for Business: 15%

Did you own the home for more than 12 months?

Tax-Free (Exempt) Gain

$340,000

Taxable Capital Gain

$30,000

* 50% CGT discount applied to the business portion.

4. The 6-Month Overlap Rule

It is common to buy a new home before you have officially sold your old one. Normally, you can only have one main residence at a time. However, the ATO allows a 6-month overlap. You can hold both properties and claim the exemption on both for up to 6 months, provided the old property was your main residence for a continuous period of at least 3 months in the 12 months before you sold it.

Next Steps: Property tax rules are strict, and getting them wrong can lead to a massive unexpected tax bill. If you are planning to sell a property that hasn't strictly been your family home for the entire time you owned it, contact Loyal Bright Accountants today for a comprehensive CGT assessment.

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