In general, your main residence – i.e. the place where you live – is exempt from capital gains tax (CGT).

This exemption can be extended by up to six years where you rent out the property and do not establish a new main residence elsewhere in the world.  This rule is sometimes referred to as the “Six Year Rule”.  It is also known as the “Temporary Absence Rule”.

The six years resets each time you return to live in the property, but you would need to live in the property for at least 6 months in order to re-establish the property as your main residence.

If you do not rent out your property after you cease living in it, you can treat the dwelling as your main residence indefinitely.  However, it should be noted that spending a significant time in your property during an overseas assignment could have an impact on your non resident status.

Main residence exemption only applies to one property

If you own more than one property, you can only claim the main residence exemption in respect of the property you choose to live in.  The main residence exemption can be applied to one property and then switched to another property that you move into, but it cannot apply to two properties you own at the same time.

Tax benefit is even more significant for non residents following the change of the CGT rules from 8 May 2012

Given that CGT rules changed on 8 May 2012 to deny non resident taxpayers the 50% discount on capital gains for assets owned for more than 12 months, the main residence exemption is effectively more valuable in terms of the tax benefit it can offer.

If you are thinking about selling one of your properties, you need to think carefully about how the Six Year Rule may apply to your situation. You need a valuation after the 6 year exemption ceases. At the end of the 6 year exemption period, you will need a Market Valuation to determine the CGT that will apply to your previous main residence.