FORMER HOME
UP TO 6 MONTHS OVERLAP
both may count as your main residence, conditions apply
New HOME
The six-month overlap window between selling your old home and settling into your new one.
Buying a new home before your old one sells is common, particularly when navigating Melbourne conveyancing, where purchase and sale settlement dates don’t always line up neatly. That can leave you owning two homes at once while you move, sell and organise settlement.
This guide explains, in plain English, what happens to your old home’s tax status once you move out, why the timing matters, and what you need to consider when managing two properties. For homeowners dealing with Melbourne property conveyancing, understanding these dates can also help keep the sale and purchase settlements properly coordinated.
What Does "PPOR" Actually Mean?
PPOR is short for Principal Place of Residence. It simply means the home you actually live in, not a property you happen to own but don’t live in.
The Australian Taxation Office (ATO) checks real, everyday facts to work this out. Where do you sleep most nights? Where is your mail sent? Where are you enrolled to vote?
Your PPOR matters a lot at tax time. When you sell your main home, any capital gain is generally exempt from Capital Gains Tax (CGT) if the relevant conditions are met. This is called the main residence exemption. A property that has never qualified as your main residence generally won’t receive the full exemption, although a former home may continue to qualify after you move out under the absence rule.
So knowing which home counts as your PPOR, and for how long, can materially affect your tax position when you eventually sell. If you’d like the fuller picture of how PPOR status affects a property transaction generally, our guide on understanding PPOR in property transactions covers the basics in more depth.
What Happens the Moment You Move Out
Here’s some good news. Moving out of your home doesn’t switch off your CGT exemption overnight.
There’s a rule known as the “absence rule”. It sits in section 118-145 of the Income Tax Assessment Act 1997. It lets you keep treating an old home as your main residence, even after you’ve moved out.
But it’s a choice you make. It doesn’t happen by itself. And it only works if the home was genuinely your main residence to begin with. A weak or undocumented history of actually living there won’t be rescued later.
If you’ve bought a new place and haven’t sold your old one, you technically own two properties at once. Usually, only one of them can be your CGT-free main residence for any given period, apart from a short overlap covered below.
The Six-Year Rule, Explained Simply
People often call the absence rule “the six-year rule”. Here’s how it works.
If you move out of your home and use it to produce income, such as by renting it out, you can generally choose to keep treating it as your main residence for CGT purposes for up to six years of income-producing use during that period of absence.
If the property remains fully covered by the main residence choice and the other eligibility conditions are satisfied, the gain may still be fully exempt from CGT during that period. You can read more about this on the ATO’s page on treating a former home as your main residence.
Illustration: up to six years of income-producing use during an absence
The clock can reset.
If you genuinely move back in and re-establish the home as your main residence, a later move-out starts a fresh six-year count.
It’s counted per absence, not per property.
Each real move-out and move-back-in begins a new count. Moving a couch back in for a weekend won’t count as re-occupying.
Renting It Out vs. Leaving It Empty
The six-year limit only applies if your old home is earning income, most commonly rent.
If you leave it empty instead — no tenants, no income — the absence rule has no fixed time limit. This lasts as long as you don’t also claim another property as your main residence for the same period.
| Scenario | Your CGT exemption | Other costs to know about |
|---|---|---|
| Old home rented out | Up to 6 years of income-producing use may remain covered; beyond that, part of the gain may become taxable. | Rent counts as income; some costs may be deductible. |
| Old home left empty | No fixed time limit, if conditions are met | Possible Victorian vacant residential land tax. |
The Six-Month Overlap Rule for Your New Home
This is the part that matters most if you’ve just bought a new home before selling the old one.
Normally, only one home can be treated as your main residence at a time. When you change homes, however, both the old and new dwelling may qualify as your main residence for a limited overlap of up to six months, provided the relevant conditions are met.
To qualify, you’ll generally need to have lived in the old home as your main residence for a continuous period of at least three months in the 12 months before selling it, and not used it to earn income during any part of that 12 months when it wasn’t your main home. The new dwelling must also become your main residence. The ATO’s guide on moving to a new main residence sets out the full conditions and worked examples.
If it takes longer than six months to dispose of the old home, both homes are covered by the moving-home concession only for the last six months before disposal. For the earlier overlap, the CGT outcome depends on which dwelling is treated as your main residence and the circumstances of each property.
What If It’s Only Partly Exempt?
Not every outcome is all-or-nothing. Sometimes a home was your main residence for only part of the time you owned it. Sometimes a rented former home is sold after its six years have run out.
In these cases, only part of the capital gain may be exempt. Time-based apportionment can apply, but special rules may also affect the calculation, including the ‘home first used to produce income’ market-value rule.
This is why accurate dates matter so much. The day you moved in. The day you moved out. The day tenants moved in. The day contracts were exchanged. Each one becomes a number in a calculation, not just a memory.
Victorian Land Tax and the Vacant Home Tax
CGT is a federal tax, run by the ATO. Victorian land tax and vacant residential land tax (VRLT) are completely different. They’re run by the State Revenue Office (SRO), and they don’t follow your CGT choices.
Land tax: your main home is usually exempt from Victorian land tax. A second property, like your old home, once you’ve moved into the new one, might not be, depending on how it’s used. Victoria’s temporary-absence provision can allow a former PPR — the SRO’s term for your PPOR, used specifically for land tax — to remain exempt from land tax for up to six years where the relevant conditions are satisfied. Generally, the absence must be temporary, you must intend to return, another property must not be claimed as your PPR, and the relevant income requirements must be satisfied. You can read the details on the SRO’s page on applying for a principal place of residence exemption.
Vacant residential land tax: since 1 January 2025, this tax has applied right across Victoria, not just inner Melbourne. If a home sits empty for more than six months in a calendar year, VRLT can apply, and simply advertising it for sale or rent doesn’t count as occupying it. Owners must notify the SRO when required, even if they believe an exemption applies. If they have previously made a notification, they generally only need to make a new one if their circumstances change.
Leaving the old home empty ‘just until it sells’ may create a vacant residential land tax notification obligation if it remains vacant for more than six months in a calendar year, although an exemption may apply depending on the circumstances.
Common Mistakes Homeowners Make
Assuming the exemption applies automatically
The absence rule is a choice you make and can show evidence for, not a default setting.
Losing track of key dates
The move-out date, tenancy start date, and settlement dates on both properties should all be written down and kept.
Treating two homes as exempt at once Outside the overlap window,
This is a frequent cause of unexpected tax bills.
Mixing up CGT rules with Victorian land tax rules
They're assessed differently, by different authorities, using different criteria.
Not checking the rules before moving overseas
If you're a foreign resident for tax purposes when the relevant CGT event occurs, eligibility for the main residence exemption may be restricted unless a specific exception applies.
What to Do Before You Settle: A Melbourne Conveyancing Checklist
If you’ve bought a new home and still hold the old one, a local conveyancer in Melbourne can help coordinate the property settlement side, while your tax adviser confirms the tax implications. The practical steps are simple, even though the tax rules aren’t.
Wrap Up
Buying a new home before your old one sells is common, and it doesn’t automatically cost you the main residence exemption.
This article is general information only, not personal tax, legal or financial advice. Everyone’s situation is different. Always confirm your position with a registered tax agent and speak with a licensed conveyancer before you sign anything.
Getting that timing right starts with the contract itself, and that’s exactly where professional conveyancing services in Melbourne can help. If you’d like a hand keeping your two settlements on track, the team at Eagle Peak Conveyancing offers fixed-price property conveyancing in Melbourne with no hidden extras, and we’re happy to talk through your dates before you sign anything.
Frequently Asked Questions
Straight answers to common Melbourne conveyancing questions homeowners ask when they’re juggling two properties at once.
Does my home stop being my PPOR the second I move out?
Can both my old and new home be treated as my main residence at once?
What happens if I rent out my old home for more than six years?
Do I still get the exemption if I leave my old home empty instead of renting it?
Does Victorian land tax work the same way as capital gains tax for my PPOR?
Not sure how your move affects your PPOR?
Every settlement date and contract condition can shift where you land on the six-month overlap. Get a free review of your first contract with us before you commit to a timeline.
