Tax Tip 537: Applying the 6 Year Rule to Multiple Properties

Tax Tip 537: Applying the 6 Year Rule to Multiple Properties



There is a lot of confusion out there with the so called ‘6 year rule’ – which allows a person to rent out their main residence yet still keep it exempt from CGT.

See

Tax Tip 385: Misunderstandings with the 6 Year Rule Tax Tip 385: Misunderstandings with the 6 Year Rule


It is possible to apply the 6 year rule against multiple properties. But generally, only one can be the main residence for any overlapping period. This means, generally, that only one property could be fully exempt where there is an overlapping period.



Example

Bart buys 123 Smith Street on 1 Jan 2020 and moves in. He moves out on 1 July 2020 and starts renting it.

On 1 July 2020 he buys and moves into 456 Jones Street and establishes it as his main residence. He moves out on September of that year.



Bart could use the 6 year rule on either property. He has a choice.



But if Bart sells Smith Street in 2023 and claims the full main residence exemption on that property that will mean he cannot claim Jones street was his main residence for the whole ownership period as it wasn’t his main residence, for CGT purposes, because Smith Street was.



But Bart also bought 678 George street in 2024. He lived in it for a few months and then moved out and rented it. Bart could use the 6 year rule on George street so that this could be fully CGT exempt (all other requirements met) if sold within 6 years of moving out.


A taxpayer could use the 6 year rule on multiple properties, but just not for any overlapping periods. For overlapping periods they may have a choice as to which of 2 main residences they could apply the full CGT exemption to. Note also that spouses only get one main residence exemption between them so if Bart’s spouse counted a property as their main residence this may prevent Bart from also claiming a property for the same period.