Author: MollyM(Enthusiast)Enthusiast 30 Jan 2022
A client purchases a property to live in. There is already a tenancy in place, but that only runs for less than 6 months. No extension on the lease is given, it is just run out. They pay stamp duty suitable to PPOR. They attempt to rent out their previous PPOR.
They move into the new premises as soon as the existing lease (existing from prior to purchase) runs out. After a few weeks they realise that they will not be able to rent out their previous PPOR and that it would be better to rather move back there and rent out the new property. They contact the stamp duty office, pay the extra amount of stamp duty and convert the property to an investment property. Do they qualify for the 6 year rule concession.
1.) whilst they still had to run out he existing lease, they did live it in immediately when they could
2.) They only lived in the property for 4-6 weeks
3.) They have proof of trying to rent out their previous PPOR, and had utilities of the new property in their name etc.
Q. Do they qualify for the 6 year rule?
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2 replies
Author: BlakeATO(Community Support)Community Support 1 Feb 2022
Hi @MollyM
You can only use the main residence exemption on one property at a time.
To establish a property as your main residence (not PPOR - that's a state government term), you need to prove it is truly your home. Generally, you'll need to live in the property for at least three months to show this - a few weeks isn't enough. We talk about this guide of three months under other parts of claiming the main residence exemption. This means it won't be considered their main residence, and they won't be able to use the six-year rule.
Even if they did claim the main residence exemption rule on the new property, it can't work retroactively. The property being rented out before them moving there cannot be exempt from capital gains because at that point it was not a former home. It can only be fully exempt where they move in as soon as practicable (having tenants move out), not as soon as is practical (waiting for the lease to expire).
They can likely continue to treat the previous property as their main residence under the six-year rule.
You can read about the main residence exemption, and treating a former home as your main residence on our website.
