6 Year rule

One for the accountants and brokers but here is my 2c. The loan purpose is with your bank, this is different from the 6 yr ppor rule which is about your capital gains tax liability with the ATO.

Re the ATO – yes you are allowed to have a ppor, then move out (say away for work like you stated) then rent it out, and as long as you dont buy another ppor you can hold the property for up to 6 yrs, then if you sell it (say after 5) ALL CAPITAL GAINS ARE STILL TAX FREE.

Re ongoing tax claims – yes you can rent the property, which then has to be declared as income, but you can claim interest costs and management fees. The issue you will need to check with your accountant is (depending on how your loan is structured) whether you have a nice neat way of actually claiming and tracking these things.

With the loan, the original loan was set up with the bank as ppor, most likely as principal and interest payments. If you want to reduce your cash costs, many investors would choose to go interest only at the point so you might want to call the bank and request interest only payments. I would be less concerned with the interest rate and more concerned with getting the right set up, but whether you can leave the original loan in place with the lower rate after you have moved out I will leave that to the accountants and brokers.

Hi Chattaway,

This is one that I have look at for years, nearly 6 years actually, as I am coming up to the 6 year mark for my own PPOR in sydney since we started renting it out and we are looking at selling to capitalise on this, as to continue renting it out would be a huge hit to the hip pocket between capital gains and what we would be exempt for.

Two things to note: you can only have one PPOR at a time, and cant swap at convenience, once you claim a new PPOR residence the old is no longer and it is an investment whilst the latter is the PPOR, however from how I understand it, this election is made when selling one of the residences rather that when purchasing (assuming both meet the 6 year rule and the PPOR rule, then you can choose which to claim as the investment and which to claim as the PPOR).

The other is that the 6 year rule is 6 years RENTED in total between you occupying it, so if you rent it for 3 years leave it vacant for 2 years and then rent it for 2 years, this is only 5 years, and if you move back into it at any stage it resets the 6 year period so if you move for work again (such as Military people are likely to move in and out of a particular location a lot) you can rent it indefinietly as long as you live in it between each 6 years worth of renting – even to the point of you know you are going to live in it in 6 months time and it is almost at the 6 year mark, you leave it vacant for the 6 months so that the clock stops on the 6 years as it is vacant (as long as the 6 month vacancy is worth the loss of rent vs actual proportion of capital gain for the 6 year period).

For more info on the facts rather than my less than expert interpretation above the ATO web site explains it well:

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Real-estate/Treating-a-dwelling-as-your-main-residence-after-you-move-out/

– John

• This reply was modified 8 years, 6 months ago by  aussieguy2000.