Moving back into your investment property? Here’s everything you need to know

Key Takeaways:

• You can legally move back into your investment property in WA, but you must follow the correct notice periods and tenancy laws.
• Moving back in can reduce the Capital Gains Tax (CGT) you’ll pay when selling, thanks to the main residence exemption and partial CGT rules.
• The ATO’s 6-year rule may reset when you reoccupy your property as your main residence, potentially offering future tax benefits if you rent it out again.
• Before moving in, you’ll need to organise tenant notices, update insurance, consider refinancing, and possibly book a valuation.

So, you’re thinking about moving back into that old investment property of yours? Maybe the tenants have moved on, maybe your lifestyle’s changed, or maybe you’ve done the maths and realised there’s a sneaky little tax perk involved. (Spoiler alert: you’re not wrong.)

But before you start packing boxes and measuring for new curtains, there are a few things to get straight.

Let’s walk through exactly what’s involved so you can make the move home with confidence (and no nasty surprises from the ATO).

Can you actually move back in? (and what happens if you do?)

Yes, you can move back into your investment property, but only once you’ve followed the proper tenancy rules in WA.

If your rental property still has tenants, you’ll need to give them appropriate notice depending on the lease type. For periodic leases, that’s usually 60 days. For fixed-term agreements, you generally need to wait until the lease expires—unless both parties agree to end it early.

It’s important to follow the legal steps and communicate clearly (this isn’t the time to wing it).

If you’re unsure where to start, Semple can guide you through the process and make the transition smoother for everyone involved.

How Capital Gains Tax works when you move back in

Capital Gains Tax (CGT) doesn’t just disappear when you move back into your rental property, but it can be reduced. That’s where the main residence exemption comes in.

The ATO looks at how long the property was your main residence versus how long it was an income-producing rental property. You’ll generally pay CGT on the portion of time it was rented, and claim the main residence exemption on the time you lived in it.

A simple CGT example

Let’s say you bought a property for $500,000 and lived in it for 2 years. Then you rented it out for 4 years. Now, you’re moving back in and planning to sell in the future for $800,000.

That’s a $300,000 capital gain. Because the property was rented for 4 out of the 6 years you owned it, only two-thirds of the gain can be taxed, so $200,000 becomes the taxable portion. If you held the property for over 12 months, you might also be eligible for a 50% CGT discount, cutting the taxable amount to $100,000.

This is what’s known as a partial CGT exemption, and it can make a big difference come tax time.

Timing is everything: The 6-year rule and strategic move-ins

Here’s where things get a little nuanced: the ATO’s 6-year rule.

If your property was once your main residence, you can rent it out and still claim the CGT exemption for up to six years, as long as you don’t treat another property as your main residence during that time.

If you move back in and re-establish the property as your main residence, a new 6-year absence period may begin if you later rent it out again, depending on your individual circumstances.

This rule can be a game-changer for FIFO workers, remote professionals, or anyone temporarily relocating. With some clever planning, it can reduce (or even eliminate) the CGT payable when you eventually sell your investment property.

Important note: This information is general in nature and does not constitute tax or legal advice. Capital Gains Tax outcomes can vary depending on your individual circumstances. Always seek advice from a qualified accountant or tax professional before making decisions based on CGT or ATO rules.

Practical steps to take before you move back in

1. Give your tenants proper notice

If the property’s still tenanted, you’ll need to issue the correct notice based on the lease type. In WA, that’s usually 60 days for a periodic lease. For fixed terms, you’ll need to wait until the end unless both parties agree. Semple can help manage this process fairly and legally.

2. Book a professional valuation (optional but helpful)

While it won’t reset your CGT cost base, a current valuation can still be useful, especially if you’ve renovated or the property’s value has changed significantly. It can help with future sale planning, financial strategy, or loan refinancing.

Your accountant might also recommend keeping a valuation on file for CGT records, depending on when the property first changed use (like when it became a rental).

3. Notify relevant parties

Update your details with the council, ATO, utility providers, and the electoral roll to reflect that you now live in the property.

4. Update your insurance

Switch from landlord insurance to standard home and contents cover to avoid any gaps in protection.

5. Review your loan

If you’ve been on an investment loan, chat to your lender about refinancing your home loan as residential rates are often more competitive.

6. Time it right

Plan your move around lease expiry, renovations, or market conditions, especially if you’re considering selling the property down the line.

What you can no longer claim (the tax side of moving in)

Once your investment property becomes your home, it stops being an income-producing asset, which means your tax perks take a bit of a hit.

You’ll no longer be able to claim:

• Rental income deductions such as advertising, property management fees, and maintenance costs
• Loan interest deductions on your mortgage
• Council rates and land tax as tax-deductible expenses
• Depreciation on plant and equipment (especially under the 2017 second-hand asset rules)
• Insurance premiums for landlord cover

In other words, moving back in helps reduce your CGT, but it also switches off a lot of the deductions you may have been relying on come tax time. If your property was negatively geared, it’s a good idea to speak with your accountant to understand the full impact on your finances.

Thinking of selling after moving back in? What you need to know

If selling is on the horizon, timing matters, and so does understanding how your property’s past life as a rental affects things.

Even after you move back in, you’ll likely only qualify for a partial CGT exemption. That’s because the capital gains tax still applies to the period the home was an income-generating investment property.

To reduce what you’ll need to pay CGT on, consider:

• Holding the property for 12+ months before selling, which may help you access the 50% CGT discount (if eligible)
• Living in the property again and keeping clear records, which can support your main residence exemption claim
• Getting tailored tax advice, especially if you’ve used the 6-year rule or had multiple changes in use
• Holding off on the sale if the market’s soft, since there’s no rush if it means keeping more of your gain

Because CGT outcomes depend on individual circumstances, professional tax advice is strongly recommended before selling.

Let’s make the move home easy

Moving back into your old rental can be a smart step, but it’s not always straightforward. Between giving notice, ending leases, switching insurance, and sorting tax details, there’s a lot to juggle before you even unpack a box.

At Semple, we help take the pressure off. Our team knows the ins and outs of property management in Perth, including how to handle tenant transitions legally and respectfully. Whether you’re moving back in, planning to sell, or just weighing up your options, we’ll walk you through the process and keep things simple.

Get in touch today and let’s make your next move a good one.