Some of the homeowners most likely to encounter the 2026 CGT reforms are people who spend time overseas or use part of their home for business. Both situations were already complicated. From 1 July 2027, valuation, residency and record-keeping issues become even more important.

The practical change

A partly taxable home may need its gain divided between the period before 1 July 2027 and the period afterwards. The post-2027 component generally uses cost-base indexation rather than the ordinary 50% discount, and the minimum 30% tax regime may also apply. The property’s value immediately before 1 July 2027 may therefore become an important reference point.

Working from home is not necessarily business use

Simply working remotely from a kitchen table, study or spare bedroom will not generally reduce the main residence exemption. The risk is greater where a part of the home has the character of a genuine place of business, such as consulting or treatment rooms, a workshop, dedicated client facilities, signage or separate business access.

Where part of the property is used in this way, a proportion of the eventual gain may become taxable. The calculation can depend on how much of the property was used and for how long.

There may be more than one valuation date

If a fully exempt home begins to be used as a place of business, the existing first-income-producing-use rule may require a valuation at that time. If business use started before July 2027 and continues beyond that date, the Budget transition may create a second valuation point.

Business use can also start after 1 July 2027. A home may be completely exempt at the transition date, then be converted into consulting rooms several years later. Contemporaneous evidence from 2027 may still assist with the later calculation, particularly if the property has been altered. This is a reason to consider the issue, not a recommendation that every remote worker obtain a formal valuation.

Moving overseas: the sale date is critical

Foreign residents generally cannot claim the main residence exemption when they dispose of Australian property, unless the limited life-events test applies. This can deny even a partial exemption and can expose gains arising while the property was previously the family home.

The CGT event for a normal property sale occurs when the contract is entered into. Anyone considering an overseas move or sale should therefore obtain advice before signing, rather than treating settlement as the decisive date.

Returning expatriates may return to the ordinary rules

A person who returns to Australia and is an Australian tax resident when the property is sold is not caught by the foreign-resident main residence exclusion. The ordinary MRE rules can then apply again, including a potentially available six-year absence choice for a former home rented while the owner was away.

However, the Budget reforms create a separate residency question. A period of foreign or temporary residency after 1 July 2027 can prevent access to post-2027 indexation, even if the person has returned before sale and can claim some or all of the MRE. In other words, returning before sale may improve the exemption outcome without restoring every benefit of the new CGT regime.

Residency records matter

Tax residency is not always the same as citizenship, visa status or the date a person boards a flight. Files should retain evidence supporting when residency changed, together with dates of occupation, rental agreements, overseas accommodation and any return to the home.

The complication can also arise after a family law rollover. The person receiving a property may need information about the former spouse’s post-2027 residency, not merely the amount originally paid for the property.

Practical action points
  • Before using dedicated rooms for clients or a business, record the start date, floor area and alterations.
  • Keep plans, photographs, building invoices and any valuation obtained when business use begins.
  • Before moving overseas, review the intended use of the home and the likely timing of sale.
  • Before signing a sale contract, confirm the owner’s tax residency and whether the six-year absence rule may apply.
  • For a returning expatriate, analyse MRE eligibility and post-2027 indexation separately.
  • Following a family law transfer, retain both parties’ ownership, use and residency histories.
The bottom line

A home can move from fully exempt to partly or fully taxable because of a relatively ordinary life event: starting a practice, accepting an overseas posting or returning to Australia. Early advice and good evidence are far more useful than trying to reconstruct years of property use and residency after a sale contract has been signed.