6 Year rule

Question

Hi,

Is it possible to reset the 6 year rule so I can continue to receive rental income and claim PPOR CGT benefit if and when I decide to sell the property. If so how?

Thanks

Cathie

Answer

Yes, you can reset the 6 year rule as many times as you like but it is important that you can prove you did live in it as your home each time.
Below is the relevant section of the Act. The phrase that is important to you is
“You are entitled to another maximum period of 6 years each time the dwelling again becomes and ceases to be your main residence”
So it is simply a matter of making it your main residence again. It is important that it does not earn any income during the time it is again your main residence. You need to actually set up home there, not just have a holiday. This means moving your personal effects into the house, putting the power on in your name and make sure that there is sufficient power used to support the fact you were living there. Change your address to there. Ideally live there for 3 months, though the legislation does not specify a period of time. You need to be able to show that it was your intention to set up home there. Note if you are based overseas and just come home for a visit and stay in the house while still being technically a non resident of Australia for tax purposes ie still employed overseas, then you will not be able to re establish you main residence exemption on the house during that time.

118-145(1)
If a *dwelling that was your main residence ceases to be your main residence, you may choose to continue to treat it as your main residence.
118-145(2)
If you use the part of the *dwelling that was your main residence for the *purpose of producing assessable income, the maximum period that you can treat it as your main residence under this section while you use it for that purpose is 6 years. You are entitled to another maximum period of 6 years each time the dwelling again becomes and ceases to be your main residence.
118-145(3)
If you do not use the *dwelling for that purpose, you can treat it as your main residence under this section indefinitely.
118-145(3A)

This section does not apply if the *dwelling was your main residence because of section 118-147 and ceases to be your main residence because of subsections 118-147(3) and (4).
View history note
118-145(4)
If you make the choice, you cannot treat any other *dwelling as your main residence while you apply this section, except if section 118-140 (about changing main residences) applies.
Example:
You live in a house for 3 years. You are posted overseas for 5 years and you rent it out during your absence. On your return you move back into it for 2 years. You are then posted overseas again for 4 years (again renting it out), at the end of which you sell the house.
You have not treated any other dwelling as your main residence during your absences.
You may choose to continue to treat the house as your main residence during both absences because each absence is less than 6 years.
You can make this choice when preparing your income tax return for the income year in which you sold the house.

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