“There isn’t any legal guidance surrounding the period of time a person lives in their residence to be exempt,” says Chapman. “The property simply needs to qualify as your main residence, and the ATO sets out a number of criteria for that.”
Do you actually live on the property? Is your mail sent there? Are your personal belongings there? Is it your address on the electoral role? Answering yes to these questions indicates it is the primary residence. You’ll need to live in a property for twelve months for it to be counted as your main residence before you can move out and use it as an investment property.
The main residence is a very tax-effective investment, because if the main residence exemption applies, then any capital gains made on the residence sale are tax-free. The main residence exemption generally applies to a dwelling owned by the taxpayer to the extent the dwelling was the taxpayer’s main residence and not used for income-earning purposes during the ownership period.
The ownership period is calculated from the settlement date on the acquisition of the property to the settlement date on the sale of the property. Generally, the main residence exemption is only available for one dwelling at any point in time.
An exception to this is the 6-month rule which states that where a taxpayer acquires a new dwelling that is to become their main residence, and the taxpayer still owns their existing main residence, both dwellings can be treated as the taxpayer’s main residence for a period of up to 6 months.
If you own two properties and spend an equal amount of time in both, choose the property that is likely to generate the biggest profit when it is sold as your primary residence.