Should You Move Back In to Preserve Your Six-Year CGT Exemption?
For Australian property investors, the decision to return to a former home versus keeping it rented out can carry substantial financial and tax implications—especially around Capital Gains Tax (CGT). If you occupied a property, then rented it from 2019, you may be eligible for the Australian Tax Office’s six-year CGT exemption—but that window closes in September 2025.
Key Benefits of Moving Back In Before the Cut-Off
1. Full CGT Exemption
- Re-establish your property as your Principal Place of Residence (PPOR) before September 2025 to retain the full CGT exemption.
- On a $400,000 capital gain (for example, rising from $550,000 to $950,000), you’d pay $0 in CGT.
2. Eliminate Rent Expense
- Stop paying roughly $550 per week (about $28,600 per year), freeing cash for super contributions or other investments.
3. Maintain Lower Debt Levels
- Keep your existing mortgage of $377,000 instead of borrowing around $560,000 for a new investment property.
Benefits of Keeping the Property Rented and Buying Another Investment
1. Boost Rental Income
- Continue earning about $29,900 per year from your current property and add an estimated $26,000 per year from a new build—totaling $55,900 annually.
2. Maximise Tax Deductions
- Combine negative gearing losses from two properties to exceed $97,000 in deductions, saving roughly $31,681 in tax (at a 32.5% marginal rate).
3. Grow Your Portfolio
- Benefit from appreciation, diversify your holdings, and claim full depreciation on the new build.
Financial Comparison: Move Back In vs. Rent & Reinvest
| Category | Move Back In | Keep Renting & Buy New |
|---|---|---|
| CGT on Sale (Est. $400k gain) | $0 (PPOR re-established) | ~$32,500 (partial CGT after discount) |
| Rental Income | $0 | ~$56,000/year (two properties) |
| Rent Expense | $0 | $28,600/year |
| Total Interest (Mortgages) | ~$24,505/year | ~$60,905/year |
| Upfront Costs (Stamp, LMI, Fees) | $3,000 | ~$54,550 |
| Ongoing Property Costs | ~$5,000/year | ~$10,000/year |
| Tax Deductions | Lost ~$30,000/year in negative gearing | ~$97,479/year |
| Net Cash Flow (Year 1 est.) | –$13,655 (after rent saved & tax loss) | –$62,574 to –$66,474 (after tax savings) |
Final Strategy Advice
If you’re approaching the six-year mark, moving back in could save you tens of thousands in CGT, simplify your finances, eliminate rent, and preserve your full exemption—freeing up funds for super or ETFs.
On the other hand, if you’re comfortable with higher leverage and costs, acquiring another investment property can boost rental income and tax benefits, but you may face partial CGT and larger upfront expenses.
Always consult a tax advisor and mortgage broker to review your borrowing capacity, tax position, and CGT eligibility before making a move.
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