How does the main residence CGT exemption work for your family home in Australia?

In Australia, your main residence (also called your family home or principal place of residence) is generally exempt from capital gains tax (CGT) when you sell it. This is one of the most valuable tax concessions available to individuals.

To qualify for the full exemption, all of these must apply:

• The property was your main residence for the entire period you owned it
• You did not use it to produce income (such as renting out a room)
• The land is not greater than 2 hectares
• You are an Australian resident for tax purposes

Partial exemptions and special rules:

• Absence rule (6-year rule): If you move out of your home, you can treat it as your main residence for up to 6 years while renting it out (or indefinitely if not renting it out), provided you do not nominate another property as your main residence during that period.
• Income-producing use: If you use part of your home to produce income (for example, renting out a room or running a home business from a dedicated area), you may need to apportion the exemption and only a partial CGT exemption will apply.
• Inherited properties: If you inherit a dwelling that was the deceased's main residence, a CGT exemption may apply. The rules depend on when the deceased acquired the property and whether the property was their main residence just before death.

Moving between homes: You can only have one main residence at a time. If you are between homes, you can treat both as your main residence for up to 6 months if you sell the old one within that period.

Keep records of purchase price, improvement costs, and periods of occupancy to support your exemption claim.