Keep, rent or sell the family home when you retire overseas

Why does the order of the steps matter?

Selling is the hardest step to undo, and when you sell can change your tax. Sell after you have become a foreign resident for tax and you can lose the main residence exemption from capital gains tax.

Which of the three choices suits you depends on your whole situation. That’s a question for a registered tax agent and a licensed financial adviser. What we can do is set out the rules for each one.

Keep, rent or sell: what changes?

Each choice touches two sets of rules: the Age Pension, run by Services Australia, and capital gains tax, run by the ATO.

Your house	Age Pension	Capital gains tax
Keep it, empty or with family in it	Stays your home and exempt from the assets test for the first 12 months of a temporary absence.	No change while it stays your main residence, if you are an Australian resident for tax when you sell.
Rent it out	Rent counts as income. The home is exempt from the assets test for the first 12 months away, then it counts as an asset.	The 6-year rule can keep it your main residence, but only if you are a resident for tax when you sell.
Sell it	The home is gone from the assets test, and the sale money is counted instead. Ask Services Australia how.	If you sell while a foreign resident, there is no main residence exemption, apart from some life events.

What happens if I keep the house while I am away?

If you leave your home temporarily, it stays your principal home for the Age Pension, and exempt from the assets test, for the first 12 months. If you are still overseas after 12 months, it becomes an assessable asset. Our guide to whether the house counts while you are away has the details and the assets test limits.

Leaving to live overseas for good is treated differently. The 12 months doesn’t apply, and your homeowner status is updated when you move. And if your partner still lives in the house, Services Australia says it does not count it as an asset.

Meanwhile the rates, insurance and upkeep carry on, and someone has to check on the house and sort out whatever goes wrong while you’re away.

Can I rent out my house while living overseas?

Yes, and the rent counts for both the pension and tax. Services Australia treats rent from your former home as income under the income test, after the deductions it allows (loan interest, rates and upkeep, for example). That can lower your pension, and Services Australia can tell you by how much for a given rent.

If you become a foreign resident for tax, rent from your Australian house is taxed at foreign resident tax rates: 30% from the first dollar in 2025-26, with no tax-free threshold.

Capital gains tax is where the ATO’s 6-year rule comes in. It lets you keep treating a rented-out former home as your main residence for up to 6 years each time you are away. Leave it empty and there is no time limit. Either way, the rule only helps if you are an Australian resident for tax when you sell.

What happens if I sell my house before moving overseas?

If you sell while you are still an Australian resident for tax, the usual main residence rules apply. If you sell after you have become a foreign resident, the ATO says you get no main residence exemption, not even a partial one, for sales after 30 June 2020.

The only exceptions are some life events, while you have been a foreign resident for 6 years or less: a terminal medical condition for you, your spouse or a child under 18; the death of your spouse or a child under 18; or a sale under a formal agreement after a marriage or relationship breakdown.

The Age Pension has its own rule. Services Australia’s staff guidance says that if you do not plan to buy another home, the sale money counts under the income and assets tests straight away. Sale money you plan to put into a new principal home can be exempt from the assets test for up to 24 months (for sales from 1 January 2023). Ask Services Australia how this applies to you.

Talk to a registered tax agent before you sell, and before you leave. Whether you are a foreign resident depends on your whole situation: where you live, your family, your ties and your plans. The ATO points to a 2013 legal decision: a person who does not cut their connection with Australia is treated as a resident. Our guide to tax residency when you retire overseas explains the tests.

An example, not real people

Helen and Tony, 66 and 68, own their house outright. They plan a trial year in Penang and will rent the house out while they are away.

Question	What the rules say
Does the house count for Tony’s Age Pension in the first 12 months?	No, if the absence is temporary.
Does the rent count?	Yes, as income, after allowable deductions.
If they stay longer than 12 months?	The house becomes an assessable asset.
If they become foreign residents for tax and sell while away?	No main residence exemption, unless a life event applies.
If they come home, are residents again, then sell?	The 6-year rule may let them treat it as their main residence. Their tax agent can check.

Which way Helen and Tony go is their call. The table just shows how much rides on the order they move, rent and sell in. Our page for homeowners brings the other house questions together.

Questions to take to a registered tax agent

1. Will I still be an Australian resident for tax while I am away, and after?
2. If I rent the house out, how is the rent taxed, and what deductions can I claim?
3. Can the 6-year rule apply to me, and what happens if I sell while overseas?
4. What order of moving, renting and selling keeps the most options open for me?
5. What records should I keep from the day I leave?

Services Australia can tell you how renting or selling changes your pension. What to do with any sale money is one for a licensed financial adviser of your choice. If you’d like to work out which questions apply to you first, bring them to a free planning session on Zoom.

What this means for you depends on

• Whether you are going for a trip, a trial year, or to live overseas for good.
• Your tax residency when you sell: Australian or foreign.
• Who is in the house while you’re gone: tenants, nobody, or your partner.
• How long you are away (the 12-month and 6-year limits both matter).
• Whether you get the Age Pension, and how close you are to the assets and income test limits.
• The chance you’ll want to come back to the same house.