For most Australians, the family home is known as the principal place of residence. The Government has indicated that the full capital gains tax exemption for owner-occupied homes will continue to apply. This means that, where a property qualifies as a person’s main residence, it should generally remain exempt from capital gains tax when sold.
A common question is what happens if a family home later becomes an investment property. Under the reforms, if the property was already owned before 7:30pm AEST on 12 May 2026, the Government has confirmed that it may still retain access to the current negative gearing rules under the grandfathering provisions.
In simple terms, this means that if an existing owner-occupied home is later rented out and the rental property makes a loss, the owner may still be able to use those losses to offset other taxable income. This is important for homeowners who may move, upgrade, relocate for work, or choose to retain their former home as an investment property.
However, the outcome will depend on the final legislation and each person’s individual circumstances, including when the property was purchased, how it has been used, and whether it continues to qualify for any CGT main residence exemption. Homeowners should seek professional tax, financial and lending advice before making decisions about converting a principal place of residence into an investment property.
Important disclosure: This article contains general information only and has been prepared without taking into account your individual objectives, financial situation or needs. It should not be relied upon as personal financial, tax, legal or credit advice. Before making any decision in relation to property, taxation or lending matters, you should consider whether the information is appropriate for your circumstances and seek advice from a qualified accountant, tax adviser, solicitor, financial adviser and/or licensed credit adviser.