Turn your main residence into an investment property

If you're considering upgrading your current home or downsizing, retaining your original property as an investment can be a strategic financial move. However, before you embark on this journey, it's crucial to understand the tax implications. 


Here’s a comprehensive guide to ensure you're well-prepared. 

 

Capital Gains Tax & main residence exemption. 


Typically, any profit or loss from selling your main residence is exempt from CGT. However, if you convert your property into a rental, the exemption rules change. Here's what you need to keep in mind: 


  • Initial investment property: If your property was first used as an investment and later became your main residence, you'll need to apportion any capital gains based on the time the property was used for each purpose. 
  • Main residence first: If you first lived in the property and then rented it out, the CGT calculation will involve determining the property's market value at the time you started renting it. You only pay CGT on the gains from that point onward. 
  • Non-residents: If you’re a non-resident when selling your property, you don't qualify for the main residence exemption. This is crucial for expatriates and those living abroad who maintain properties back home. 

 

Six-Year Rule 


Under the Six-Year Rule, you can treat your property as your main residence even after moving out. This allows you to keep the main residence exemption for up to six years if the property is rented. After six years, any gains during the rental period become fully taxable. However, you can only have one main residence at a time; if you buy another property to live in, you might lose your six-year exemption.

 

Here are two important considerations: 

  • If you purchase a new residence, you might forfeit the exemption for the old property if it's rented. 
  • If the property remains vacant (and you don’t own another residence), the exemption period is indefinite. However, recent changes in vacant land costs may make leaving the property empty a costly choice. 

 

Taxable income & deductions 


Rental income is fully taxable, but you can offset it with a variety of deductions. These include immediate deductions and spread deductions. 


  • Immediate deductions: Interest on property loans, advertising costs for tenants, repairs and maintenance (after the property is rented), rates and taxes, body corporate fees, managing agent fees, and insurance premiums. 
  • Spread deductions: Borrowing costs, depreciating assets, and capital works (building costs) are spread over time. 


Note that repairs and improvements made before renting the property are not immediately deductible. They might qualify as depreciation, or they could form part of the capital costs, reducing the overall taxable capital gains later on. 

 

Depreciation, capital works, and the 2017 depreciation deduction change. 


Depreciation and capital works deductions offer substantial benefits. A qualified quantity surveyor can prepare a detailed depreciation report to outline the deductions available. 


However, there have been changes in depreciation rules for previously used residential properties. As of July 1, 2017, Investors can no longer claim depreciation on second-hand assets (e.g., appliances or furniture) purchased with the property. Instead, these assets are factored into the overall capital gain or loss when selling the property. 

 

Important considerations before renting out your home 


Renting out your home involves a number of strategic, and even emotional, decisions. Here are a few key points to keep in mind. 


  1. Market timing: Consider whether it's the right time to rent out your property based on the rental market and property values. Talking with a trusted real estate agent (Ascent Property Co) can provide powerful insights and peace of mind here. 
  2. Property management: Decide if you'll manage the property yourself or hire a professional agent (Ascent Property Co). 
  3. Legal compliance: Understand your obligations as a landlord under local tenancy laws. If you choose to hire a professional property manager, they’ll assist here. 
  4. Insurance coverage: It vital to secure adequate insurance coverage that includes landlord-specific protections. 
  5. Tax planning: Every investment property is unique, and strategic tax planning will ensure you're maximising deductions and minimising future liabilities. The level of equity in your old house also needs to be reviewed to determine whether it’s more tax effective to rent out or sell. 

 

Ready to turn your home into a lucrative investment? 


Retaining your original property as a rental requires expert advice. Every property is unique, and tailored tax planning can ensure you're maximising your investment. Contact us to understand your potential financial gains and minimise any risks involved, and reach out to Ascent Property Co for tailored guidance and support on selling or leasing your property. 

Need help with your accounting?

Find Out What We Do

Setting Business Goals for the Year.

January 14, 2026
Set business goals you’ll actually hit. Track what matters, review often, celebrate wins, and make growth intentional. Read today’s article to learn more.

Major Defect vs Minor Defect (Usual Wear & Tear) in a Building Inspection

January 14, 2026
Understand the difference between major and minor building defects before you buy. Learn what’s serious, what’s wear and tear, and avoid costly surprises.

Your First Steps in Starting a Small Business

January 14, 2026
Thinking of starting a small business? Before you dive in, make sure your foundations are set: structure, ATO registrations, super, and workers comp. We’ve put together a simple guide to help you get started.

The 5% homebuyer deposit for first home buyers.

December 15, 2025
The Australian Government’s expanded 5% Deposit Scheme, which commenced on October 1, offers a fast-tracked path to home ownership for many aspiring buyers. By drastically reducing the deposit required and eliminating Lenders Mortgage Insurance (LMI), this program aims to unlock the door to your very own home sooner than ever thought possible. However, like any major economic policy, it has significant implications that buyers and taxpayers must consider. Here is a breakdown of how the scheme works, who qualifies, and what the potential impact could be on the property market. What is the 5% Deposit Scheme and how does it work? The scheme is designed to make home ownership more achievable, particularly for those struggling to save a 20% deposit. Low Deposit: The home buyer secures a loan with a minimum deposit of 5% (for First Home Buyers) or 2% (for single parents/legal guardians). Government Guarantee: Instead of the buyer paying LMI (which protects the lender), the Australian Government provides a guarantee to a Participating Lender. This guarantee allows the lender to provide a home loan covering up to 95% or 98% of the home's value without the usual LMI fee. No LMI: The buyer avoids paying Lenders Mortgage Insurance, significantly reducing upfront costs.  Key features of the expanded program include no income caps, as well as unlimited spots and no waiting list. The Scheme also makes a wider choice of home types available (houses, apartments, house/land packages, vacant land with a building contract, new or existing homes). It’s not just for first home buyers!

6 personal budgeting tips for Christmas.

December 15, 2025
Christmas can be the most wonderful time of the year—it can also be one of the most expensive. The key to enjoying the festive season and reducing the risk of financial stress is careful planning. As your financial partners at Ascent Accountants, we want you to focus on what truly matters—time with friends, family, and peace of mind. Six essential budgeting tips to help you take control of your Christmas spending. 1. Make a detailed budget list. The sooner you start, the more control you have. Begin by listing every expense you anticipate, including gifts, food, clothes, travel, and entertainment. Once you have your total, check it against your available funds. If the total feels too high, look at where you can cut back or spread the cost. Being realistic from the beginning prevents surprises later. 2. Prioritise what truly matters (and pay your priority debts!). When money is tight, focus your funds on the essentials and the things that genuinely bring the most joy. Order your list by priority (e.g., gifts for children first, then shared family meals, then travel). It’s okay—and essential—to say 'no' to extras that don’t fit your budget. Always consider your priority payments and debts before any other Christmas spending. Priority debts, like rent, electricity, or car insurance, must always come first as they significantly impact your day-to-day life if left unpaid. 3. Be cautious with credit and 'Buy Now, Pay Later' arrangements. It's tempting to use a credit card or a Buy Now, Pay Later option, especially when promotions promise delayed payments. However, small instalments add up quickly, and missing a payment can result in fees and/or negatively impact your credit record. If you do use credit, only borrow what you can comfortably afford to repay, and make a solid plan to pay it off as soon as possible in the new year. 4. Compare prices & shop smart. Always take time to research before you buy. Comparing online and in-store prices can result in significant savings. Be wary of high-pressure sales events like Black Friday, which often encourage impulse spending. Before purchasing, ask yourself three questions: Do I really need this? Is this on my original budget list, or is it extra? Is this truly a bargain if I don't actually need it? 5. Suggest a 'Secret Santa'. If your family or friend group has traditionally bought gifts for everyone, suggest switching to a Secret Santa arrangement. Setting a sensible spending limit or pooling funds for one thoughtful gift makes things easier and less expensive for everyone. Often, homemade gifts or vouchers for experiences are more meaningful and last longer in the memory than expensive presents. 6. Plan ahead for next year. The best way to guarantee a calm, affordable Christmas next year is to start preparing now. After this year's holidays, take note of exactly what you spent and where the money went. Set a goal for next year and start a small savings fund. Even setting aside $5 or $10 a week can make a monumental difference in managing next Christmas without stress. Need to tidy up your finances after the holidays? If the Christmas period leaves you needing advice on debt consolidation, setting up a savings plan, or just better budgeting habits for the new year, contact the team at Ascent Accountants. We can help you build the confidence to hit your financial goals!

FBT on Work Christmas Parties & Gifts

December 15, 2025
As the end of the year approaches, businesses are gearing up for the festive season, which means planning the annual Christmas party and showing appreciation with gifts. While the cheer is high, so too are the complexities of Fringe Benefits Tax (FBT). Getting the FBT treatment wrong can turn a simple celebration into an unexpected tax bill. As your trusted advisors at Ascent Accountants, here is a breakdown of the key tax rules, with a focus on the crucial $300 per person limit, to ensure your end-of-year generosity is tax-effective. The critical $300 minor benefit threshold. The Minor Benefits Exemption is your best friend for managing FBT. A benefit is generally exempt from FBT if its total notional taxable value is less than $300 (GST inclusive) per person, and it is provided infrequently and irregularly. Christmas parties (entertainment) The location and cost of your party are the key factors for FBT.
More Posts