Don’t be so fearful of generating income from the main residence Seek advice on this, but CGT on the main residence may not be so scary. If you rented a property out straight away after purchasing it and then moved into it any CGT in the future will be worked out on a time basis. The formula is No. days rented/No. days owned = CG subject to tax. For example Say you bought a property for $500,000 and rented it out for 5 years without ever living in it. After 5 years it was worth $1mil. If you sold it at this point 100% of the gain would be taxed, less expenses. But if you moved in after 5 years and then sold it at the year 10 mark it would only be 50% of the gain that is taxed. So if you sold it for $1,500,000 for example only $500,000 of this gain would be taxable. (5/10 = 50%. $1mil gain x 50% = $500k.). If you lived in the property for 15 years then the percentage subject to tax would drop = 5/20 = 10%. So the longer you live there the less percentage of the property will be taxed. But against this gain you can then claim all associated expenses that had not been claimed before. For example, interest on the loan, rates, strata, insurance etc. Even these expenses incurred while you were living there can be claimed. See Tax Tip 76: Calculating the Cost Base for CGT purposes. These expenses are used to increase the cost base. Then the 50% discount is applied. And then any CG is divided between owners. So say 5 years of expenses was $100,000. There is stamp duty, conveyancing, selling agent fees etc which may be $50,000 all up. So your $1mil gain becomes $850,000. Only 50% of this is taxable so $424,000. The 50% CGT discount is applied so it drops to $212,000. If you were the sole owner and were on the top tax rate of 47% you would pay less than $100,000 in CGT. That equates to 10% of the $1mil ‘gain’. But, wait there is more, while you were renting it out you may have saved $10k per year in tax by negative gearing the property plus you were have had access to more cash to make further investments and you would have improved your serviceability (thanks @Redom). Consider also the time value of money – money now is worth more than the same amount later, so getting the savings upfront can help with compounding. So don’t be so fearful of renting out the main residence before it becomes a main residence. Combine this concept with the strategy of renting instead of owning a main residence as discussed here Strategy: Rent where you live and Buy Investment Properties And also combine it with the use of the 6 year rule, on another property, as described here Tax Tip 23: The 6 year Absent from Main Residence Rule And you could be on to a powerful combination of strategies.