Can Sections 118‑192 and 118‑145 Apply Together for CGT?

 Author: autumn(Newbie)Newbie

20 May 2026

Hi!

I'm hoping the ATO community can provide clarity on a scenario.

It's regarding the use of Section 118-192 of the ITAA 1997 and using the 6-year rule (118-145) in parallel. Specifically, can these two provisions operate together in the following scenario?

Scenario (dates and amounts are made up):

• Home was purchased in Jan 2013. Purchase Price = 200k (excluding stamp duty).
• This home was the Principal Place of Residence (PPOR).

• Owner lived in the first home for the first year (Jan 2013 - Jan 2014) as their PPOR. Improvements were made (during that time), and the home was revalued by a Certified Practising Valuer (API-accredited) at 300k as at Jan 2014.

• During Jan 2014-Jan 2017, the owner was renting (due to work relocation) and had no other PPOR during this period.

• The owner then purchased a second property and treated that property as their new PPOR in Jan 2017.

• The first home was then sold in Jan 2026 (for 500k).

My understanding is:

1. We can use Section 118-192 of the ITAA 1997 to re-set cost base (as it was originally their main residence and was later used to produce income).
   1. Cost base re-sets to 300k
   2. CGT = 200k
2. Using the 6-year (118-145) rule:
   1. Tax-exempt period = Jan 2014 - Jan 2017 (3 years)
   2. Taxable period = Jan 2017 - Jan 2026 (9 years)
   3. 9 out of 12 years = 75%
   4. CGT = 75% x 200k = 150k
3. Apply 50% CGT discount:
   1. GCT = 50% x 150k = 75k

Net capital gain = 75k

Could someone please confirm whether this interpretation/calculation is correct, particularly:

• Whether s118-192 and s118-145 can be applied together in this way?

Thank you in advance!

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