Renting Out your Main Residence

You may choose to rent out your main residence for a period of up to 6 years without affecting you main residency status. This six year period is cumulative, so it could be gradually derived over a longer period with a number of tenants with periods of returning home and so forth. Once a person has produced income from the main residence for 6 years, the main residency benefits are lost on a pro rata basis. For example, if the main residence was rented out for seven years, the capital gains tax when sold would only be payable on that one year exceeding the allowed six.

Use for Income Producing Purposes

Where a main residence exemption would otherwise be available, but part of the property is used for income producing purposes, then the capital gains tax exemption is only partly available on a pro rata basis. For example, a room in a doctor's home being used to see patients. In such a case, the main residence exemption could still apply to the rest of the house, but would not apply to the part of the house used to produce income.

In determining whether a dwelling or part of a dwelling was used to produce assessable income, the test use is: if the individual had incurred interest on money borrowed to purchase the property, the dwelling is used for producing assessable income if that interest would be deductible.

If the property is determined to be partly used for producing assessable income, then the apportionment of the main residence exemption is generally calculated on a floor area basis (TD 1999/66).