Does the 6-Year Absence Rule Apply if You’re a Non-Resident?

Sorting Fact from Fiction

For Australians living abroad, one of the most misunderstood elements of capital gains tax is the main residence exemption — specifically, the 6-year absence rule. Many expats assume they can simply move overseas, rent out their former home, and sell it years later — tax free.

But since the 2019 changes to Australia’s main residence exemption rules for foreign residents, this assumption no longer holds true. If you’re a non-resident at the time of sale, your entitlement to the exemption (and the 6-year rule) is severely curtailed.

Let’s unpack it.

What Is the 6-Year Absence Rule?

Under section 118-145 of the ITAA 1997, if a property was your main residence and you move out (for example, to rent it out), you can still treat it as your main residence for up to 6 years, even though you’re not living in it — as long as:

• You don’t treat any other property as your main residence during that time, and
• You sell it while you are still an Australian tax resident.

This is known as the temporary absence rule, and it has historically allowed expats to move overseas, rent out their former homes, and still claim the exemption — provided the sale occurred within the 6-year window.

What Changed in 2019?

In December 2019, changes were passed that removed the main residence exemption for foreign residents altogether — subject to very limited exceptions.

From 1 July 2020, if you are a non-resident for tax purposes at the time you sell your former home, you cannot claim any portion of the main residence exemption, even if:

• You previously lived in the property as your main residence;
• You were absent for less than 6 years;
• You were renting it out for only a short time;
• You were temporarily overseas but didn’t return before selling.

This means the 6-year absence rule becomes irrelevant if you’re a non-resident at the time of sale.

Does It Matter That You Rented It for Less Than 6 Years?

No — not anymore.

Under the pre-2020 rules, a property could retain its CGT-free status if sold within 6 years of moving out (or indefinitely if not rented).

But now, if you’re a foreign resident at the time of disposal, the 6-year rule provides no protection. The entire capital gain can be taxable — even if you were away for just 1 year.

Are There Any Exceptions?

Yes — but they are narrow.

The main exception is if a “life event” occurs while you are a foreign resident, and the property is sold within 6 years of becoming a non-resident. These life events include:

• The death of your spouse or child (under 18);
• Divorce or separation;
• Terminal medical diagnosis (you, spouse, or child).

If one of these events occurs, you may still qualify for a partial exemption — but the requirements are strict, and the burden of proof is high.

Otherwise, you must be a resident at the time of sale to access any main residence exemption.

Practical Tips for Expats

1. Plan the timing of your sale carefully — if you want to claim the exemption, you may need to return to Australia and re-establish tax residency before selling.
2. Keep detailed records — including the exact dates you moved in, moved out, commenced renting, and changed residency status.
3. Seek advice early — CGT exposure can be significant, and the rules are unforgiving if you get it wrong.

Final Thoughts on the 6-Year Absence Rule for Expats

The 6-year absence rule once gave expats a clean path to rent out their former homes while living abroad and still claim the main residence exemption — but those days are gone.

Today, your residency status at the time of sale is the deciding factor. If you’re a non-resident, you can’t access the exemption — 6-year rule or not — unless you fall under very narrow life event exceptions.

At Atlas Tax, we work with Australian expats around the world to manage these complexities, plan ahead for property sales, and reduce unnecessary tax exposure. If you’re living abroad and thinking about selling your former home, get in touch before signing the contract — the tax timing could save you thousands.

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Learn More About the 6-Year Absence Rule

If managing your financial affairs across borders is starting to feel overwhelming, you’re definitely not alone. It’s a complex space, and having the right support can make all the difference. At Atlas Wealth Group, we specialise in supporting Australian expats with cross-border tax planning, superannuation, and wealth management. Contact us to arrange a consultation with a qualified adviser who specialises in Australian expat financial planning to get personalised guidance tailored to your circumstances.

To learn more, check out Atlas Wealth Groups’ podcast: Expat Chat