What is the 6 year rule for non residents?

The End of the 6-Year Rule for Non-Residents

For years, the 6-year rule offered a valuable tax break for homeowners who moved out of their primary residence and rented it out. If you left your home and leased it, you could still treat it as your main residence for Capital Gains Tax (CGT) purposes—up to six years. This meant that when you eventually sold, you could avoid CGT on the appreciation during that period, provided you didn’t claim another main residence.

But things changed significantly under new rules introduced in 2020—changes that hit foreign residents particularly hard.

The 6-year rule no longer protects non-residents at the time of sale. Even if you rented out your Australian property for less than six years, and even if you planned to return, being classified as a foreign resident when you dispose of the property wipes out that exemption. The moment of sale is what counts.

This shift closed a once-common strategy where homeowners would rent out their old homes, hoping to benefit from both capital growth and tax-free status upon resale. Now, if you’re living overseas and classified as a non-resident for tax purposes, you’ll likely face CGT on any gain—even if you only rented the place for a couple of years and relied on the old rule.

And here’s the kicker: the change is not retroactive in intent, but the timing of your residency status matters more than your history with the property. It doesn’t matter how long you lived there originally, or how briefly you rented it. If you’re not an Australian tax resident when you sell, the 6-year rule won’t save you.

It’s a clear reminder that tax planning for property must evolve with the rules. What worked a decade ago may now carry unexpected liabilities—especially for those living abroad. Always consult a tax professional before making decisions, but know this: the 6-year rule, as a safeguard for non-residents, is effectively history.