When you first bought your investment property, your accountant probably mentioned capital gains tax and deductions.
But as your portfolio grows — maybe one home and two investments — things get murky fast.
Suddenly, the main residence exemption doesn’t apply like it used to, GST becomes a question when you renovate or develop, and the ATO’s view of your “intent” can make or break your tax outcome.
This guide breaks down the key rules every Melbourne property investor needs to know — and how to stay compliant while maximising your after-tax return.
The main residence exemption (MRE) can fully or partially exempt your property from capital gains tax when you sell your home.
However, many investors lose part of the exemption by renting out or developing their main residence without realising how it affects their tax position.
In practice:
You can only claim one main residence at a time. 118-B of Income Tax Assessment Act 1997
The exemption can be partial if you’ve rented out part or all of your home for income.
If you move out and rent it, you may still claim it as your main residence for up to six years, provided you don’t claim another home as your main residence in that period.
For example, Monica, a Melbourne resident, rented out her home after moving interstate. She sold it after five years.
Because she didn’t nominate another main residence, she still received the full exemption — a key saving many property owners miss.
Before you sell or lease, it’s important to talk to a property tax accountant who can model your MRE exposure and calculate any partial CGT implications.
The rules look simple, but the real-world applications rarely are.
Here’s where many small investors in Melbourne get caught out.
You might think GST doesn’t apply because you’re not “in business” — but the ATO’s view is different when you:
Subdivide land
Build new dwellings to sell
Renovate and flip for profit
According to professional tax guidance, GST applies where your activities amount to a property enterprise, even if it’s just a one-off project.
If you buy, subdivide, and sell — or develop with the intent to profit — GST registration may be required.
What this means for you:
You may need to charge GST on the sale price.
You can claim GST credits on eligible build costs.
You’ll still need to pay capital gains tax (if applicable).
For properties that serve dual purposes — such as a home that doubles as a development site — your GST and CGT treatment interact.
Structuring this correctly can save tens of thousands of dollars and help you avoid unexpected ATO scrutiny.
If you buy a new home before selling your old one, both can be treated as your main residence for up to six months.
This is known as the “six-month rule” under section 118-140 of the Income Tax Assessment Act 1997. It’s designed for homeowners transitioning between properties, but property investors often overlook how it interacts with their other holdings.
For investors juggling multiple homes and rental properties, this overlap period can become complex.
Misallocating main residence periods is one of the most common causes of ATO audit adjustments when selling property in Australia.
Getting the timing wrong could cost you part of your CGT exemption — or trigger an avoidable tax bill.
Before signing a contract, make sure your accountant reviews the ownership dates, residence periods and intent behind each property.
When it comes to property tax, the ATO’s real focus is often documentation.
You must keep records for at least five years after the capital gains tax event — and indefinitely if the gain is deferred.
That includes:
Purchase and sale contracts
Renovation and improvement costs
Loan and interest records
Dates you lived in and rented the property
Good record keeping can make a six-figure difference when you eventually sell.
At 42 Advisory, our document management systems and secure cloud automation — make it simple. You upload your documents once, and we manage the compliance trail for you.
This means you can focus on growing your portfolio, not chasing paperwork when the ATO comes knocking.
Property decisions affect your entire personal tax position.
For instance:
Rental income can push you into a higher tax bracket.
Depreciation claims today can impact your capital gains later.
Ownership structures — individual, trust or company — can change the CGT outcome completely.
A personal tax accountant can integrate your property strategy with your overall financial plan, so you’re not just saving tax this year — you’re building long-term wealth.
At 42 Advisory, we help investors align property, income and structure. It’s about ensuring your investment decisions complement your lifestyle and future plans, not complicate them.
A Melbourne client owned two properties — one their home, one rented out.
They sold the rental and assumed the main residence exemption applied for part of it.
But because the property had never been their principal place of residence, the full capital gain was assessable.
After reconstructing their cost base and identifying missed renovation deductions, our team reduced their tax bill by 40%.
It’s a powerful reminder that property tax outcomes aren’t always intuitive — and getting professional advice before you sell can save you thousands.
At 42 Advisory, we simplify complex tax questions for Melbourne property owners and investors.
Our team combines:
Certified expertise in property and personal tax
Technology-driven systems for accurate record management
Fixed-fee pricing — no hourly surprises
Strategic tax planning before you sell, rent or develop
We believe in clarity, not complexity — and we’re here to help you make smarter, compliant property decisions that protect your returns.
Whether you’re planning your next renovation, preparing to sell an investment, or managing multiple properties, timing and structure matter.
Speak with a Melbourne accountant who understands property tax — and protect your returns before you sign the next contract.