Property guide  ·  NSW

Converting your home to an investment property in NSW

Thinking of renting out your home? Here is how converting it to an investment property in NSW affects stamp duty, capital gains tax, land tax and your home loan.

Updated October 2026 to reflect current law.

Thinking of renting out the family home? Many people convert their home to an investment property when they upgrade, move for work or want to keep a place they love. It can be a smart move. But once your home stops being your home, the rules change.

Converting can affect your stamp duty, capital gains tax (CGT), land tax and home loan. This guide explains each one in plain English, so you know what to check before you sign a lease.

Converting your home to an investment property in NSW: what changes?

The law treats your home and an investment property very differently. The label on your property affects how it’s taxed and what concessions you can get.

Your principal place of residence (often called your PPOR or PPR) is the home you actually live in. It usually gets the best treatment. That can include:

• the main residence exemption from CGT;
• an exemption from NSW land tax; and
• stamp duty help for first home buyers, if you qualify.

An investment property is one you own mainly to earn rent or capital growth. You may be able to claim deductions for things like loan interest, repairs, depreciation and agent fees. In return, CGT may apply when you sell, and land tax may become payable.

Will I have to pay stamp duty again?

Stamp duty (officially called transfer duty) is a one-off tax you pay to Revenue NSW when you buy property. If you paid full duty when you bought, renting out the property usually won’t trigger a second duty bill.

It’s different if you got a first home buyer exemption or concession. Under the First Home Buyers Assistance Scheme, you must live in the home for a set time. According to Revenue NSW:

If you move out and rent the home before you meet this requirement, you may no longer be eligible. Revenue NSW says you must tell it straight away so the correct duty can be paid. If you don’t, interest and penalties may apply.

Don’t assume you’ll only repay part of the duty. The safer view is that the whole concession may be at risk.

There is some flexibility. In exceptional cases, Revenue NSW may accept a shorter residence period or waive it. You need to ask in writing and explain what happened, with supporting documents such as your Duties Notice of Assessment. Each request is assessed on its own facts. Our guide to NSW first home buyer grants and schemes explains the schemes in more detail.

Capital gains tax when you rent out your home

CGT is the tax on the profit you make when you sell an asset, such as property. It isn’t a separate tax. The gain is added to your taxable income.

While a property is your home, any gain is usually exempt. The ATO says a home is generally fully exempt if you’re an Australian resident, it has been your home for the whole time you owned it, you haven’t used it to earn income, and the land is 2 hectares or less.

CGT isn’t triggered when you first rent it out

CGT usually applies when you sell, not when you sign your first lease. But the date the property first earns income can matter a lot later on.

The 6-year rule

If you move out and rent your former home, you can choose to keep treating it as your main residence for up to 6 years. This is often called the 6-year rule. If you sell within that time, you may still get a full exemption.

A few conditions apply:

• The property must have genuinely been your home first.
• You generally can’t treat another property as your main residence for the same period.
• If you move back in and later leave again, a new 6-year period can start.

The details are in the ATO guidance on treating a former home as your main residence.

The market value rule

This rule can quietly reset your numbers. If you first rent out your home after 20 August 1996, and you would have got a full exemption just before that, the law may treat you as having bought the property at its market value on that day.

Example: You bought for $700,000 and it’s worth $900,000 when you first rent it out. Your CGT starting point may become $900,000, not $700,000. That’s why a market valuation on the day it’s first rented can be valuable.

If you’re a foreign resident for tax purposes when you sell, you generally can’t claim the main residence exemption. Speak to your accountant if you’re moving overseas.

When does land tax start to apply?

NSW land tax is a yearly tax on the land value of your taxable land. It’s one of the biggest changes to plan for.

Your home is usually exempt under the principal place of residence exemption. To claim it, you generally need to:

• live in and use the property as your main home;
• own it as an individual (not through a company or most trusts);
• claim only one home exemption per family; and
• together with the other people living there, own at least 25% of the property. This rule now applies to all owners from the 2026 land tax year.

Once you move out and rent the property, the exemption may end. Revenue NSW does allow you to keep it for up to 6 years in some cases. One condition is that you don’t lease the property for more than 6 months in a calendar year. If you do, land tax usually applies from the next year.

Land tax is worked out on your land as at midnight on 31 December, and charged for the whole of the next year. It isn’t pro-rated. Update your details through Land Tax Online by 31 March, or by the due date on your assessment notice.

Do I need to tell my lender?

Yes, it’s wise to. An owner-occupier loan is priced and approved on the basis that you live in the property. Many loan contracts require you to tell the lender if the use changes. Staying quiet could put you in breach.

Here’s a sensible approach:

1. Contact your lender early and say you plan to rent out the property.
2. Expect a review. The lender may check whether your loan still fits its investment lending rules.
3. Compare your options. You may need to, or choose to, switch to an investment loan. Rates, repayment types and features can differ.
4. Have your numbers ready. The lender may ask for your income, expenses and expected rent.
5. Read the new terms before you agree, including the rate, fees and repayments.

Becoming a landlord in NSW

Renting out your home means taking on a landlord’s legal duties under the Residential Tenancies Act 2010 (NSW). For example, since 19 May 2025, landlords need a valid reason to end a tenancy. The NSW Government explains the rules on its page about landlords ending a tenancy.

You should also review your insurance. A standard home and contents policy may not cover a rented property. Our guide to property insurance in NSW has more.

Checklist before you convert your home

1. Check your stamp duty position. Did you get a first home buyer exemption or concession? If so, what residence period applies?
2. Get a market valuation on the day the property is first rented or made available for rent.
3. Talk to your accountant about CGT, the 6-year rule and what you can claim.
4. Check your land tax position for the next 31 December.
5. Speak to your lender before you sign a lease.
6. Update your insurance and learn your duties as a landlord.
7. Check how you own the property. Ownership shares matter for tax. Our guide to joint tenants vs tenants in common explains the difference.

Frequently asked questions

This article is general information only and is not legal advice. It reflects NSW law at the date of publication. Please contact us for advice about your circumstances.

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