As a rule of thumb, a home is no longer your main residence once you stop living in it. However, in some circumstances, you can choose to have a property treated as your main residence (i.e. principle place of residence (PPOR)).
When you can make this choice
This choice needs to be made only for the income year that the potential CGT event happens to the property – for example, the year that you sell the property.
If you own two properties:
- the property that you can choose to treat as your main residence after you no longer live in it
- the property you actually lived in during that period
you make the choice for the financial year of the sale of the first of those properties.
If you make this choice, you cannot treat any other dwelling as your main residence for that period (except for a limited time if you are changing main residences). If you do not use it to produce income (for example, you leave it vacant) you can treat the property as your main residence for an unlimited period after you stop living in it.
If you use the home to produce income (for example, you rent it out) you can choose to treat it as your main residence for up to six years after you cease living in it. If, as a result of you making this choice, the dwelling is fully exempt, the home first used to produce income rule does not apply. Note that the 6 years commences the moment you start advertising that the property is available to rent.
If the property is rented for more than 6 years, the ‘home first used to produce income’ rule usually applies, which means you are taken to have acquired the property at its market value at the time you first used it to produce income – see Using your home to produce income.
If you are absent more than once during the period you own the home, the six year maximum period that you can treat it as your main residence while you use it to produce income applies separately to each period of absence.
Note: If you are considering this information for your own personal circumstances, we recommend you contact a Financial Tax Advisor or Financial Adviser Perth