Temporary Absence Rule
The temporary absence rule allows a taxpayer that is renting out their main residence for a period to still treat the property as their main residence while they are away and claim the main residence capital gains tax (CGT) exemption. Taxpayers may rent out their primary residence for a variety of reasons including moving away for work purposes, taking an extended overseas holiday, or studying overseas.
Under the capital gains tax rules, if you:
- Use your vacated home to produce income, you can choose to treat that home as your main residence for up to six years.
- Do not use the vacated home to produce income, you can choose to treat it as your main residence for an unlimited period after you cease living in it. This will apply where the house is left empty or let rent free to relatives.
If you are applying the temporary absence rule to treat that home as your main residence you cannot nominate any other home as your main residence during your period of absence even if you actually live in the other residence i.e. you are not entitled to claim two main residence exemptions at the same time.
Once the six year period of renting out the main residence has expired, the taxpayer can move back into the main residence for a period. Then if they chose to move out and start renting the main residence again a new six year period starts.
The temporary absence rule applies to taxpayers’ main residences that are located both in Australia and overseas.