How to Prove Principal Place of Residence

Buying or selling a home is already stressful, but proving that it has genuinely been your principal place of residence (PPR) can add an extra layer of complexity. Getting this right matters because the PPR classification underpins two of the most valuable Victorian and federal tax concessions:

Capital Gains Tax (CGT) main-residence exemption, including the popular six year rule
Victorian land-tax PPR exemption, which removes annual land tax bills on your family home

In this guide we unpack what "place of residence" really means, list the evidence the State Revenue Office (SRO) and Australian Taxation Office (ATO) look for, explore common scenarios (including renting out your former home), and answer the perennial question: "Do I ever pay land tax on my primary residence?" Along the way we focus on practical tips for Melburnians, using plain English rather than legal jargon.

1. What Is a Principal Place of Residence?

Both the ATO and the Victorian SRO describe a principal place of residence as the dwelling where you ordinarily live on a permanent basis and to which you have the strongest domestic connection. The ATO sets out a non-exhaustive checklist:

you and your family live in the dwelling
your personal belongings are there
it is the address where your mail is delivered
it is the address recorded on the electoral roll
essential services such as gas and electricity are connected in your name

The property must also sit on two hectares or less of land to be fully covered, and you (and your spouse) can ordinarily only have one main residence at a time.

2. Why Proof Matters

Capital Gains Tax Implications

If the ATO disputes your main-residence status you could be assessed for tax on part or all of the capital gain when you sell.

Land Tax Consequences

The SRO automatically applies land tax to all Victorian land unless an exemption is proven. Your PPR exemption can be denied and arrears issued if you cannot substantiate that you genuinely lived there.

Penalties and Interest

Both agencies may impose penalties of up to 75% of the primary tax plus daily interest if they decide you were reckless or negligent.

3. Acceptable Evidence: Building a Robust File

There is no single "silver-bullet" document. Instead, the ATO and SRO look for a pattern over time. Below is a practical evidence list. Aim to hold at least three to five items from different categories covering the whole period in question:

Government Records

Examples: Electoral roll confirmation, Victorian driver's licence, MyGov or ATO account address records
Practical Tip: Update all government bodies immediately after moving

Utilities

Examples: Electricity, gas, water bills in your name showing normal residential usage
Practical Tip: Keep at least the first and last bill for each financial year

Communications

Examples: Home internet invoices, mobile phone bills delivered to the property
Practical Tip: Screenshot your online billing portal as backup

Financial Records

Examples: Mortgage statements, council rates notices, home insurance policies
Practical Tip: Store PDF copies as banks often purge old statements

Personal Links

Examples: Children's school enrolment forms, medical or Medicare records, vet bills
Practical Tip: School letters are powerful proof for families

Lifestyle Evidence

Examples: Gym membership address, subscription services, event tickets with the home address
Practical Tip: Small items help paint a picture of ordinary life

Important Note: If you own the property through a trust or company, gather minutes or resolutions that grant occupancy rights, because ownership and occupancy can be separated under Victorian law.

4. The CGT Main Residence Exemption in a Nutshell

Australia's CGT rules normally tax the profit on the sale of real estate acquired after 20 September 1985. However, an owner who meets the PPR criteria from purchase until sale can disregard the entire capital gain. The exemption is all or nothing unless the property was:

used to produce income (for example rented out)
not your residence for the whole ownership period
situated on land larger than two hectares

In those cases, the gain is apportioned according to the ineligible days. Detailed formulas are set out in the ATO's CGT Guide 2024.

5. Understanding the 6 Year Rule

5.1 What is the 6 Year Rule?

If you move out of your main residence and choose to treat it as your home, you may do so for up to 6 continuous years while it is used to produce income (for example, rented). If you cease earning income from it, the clock pauses, letting you restart it later. This is often called the temporary absence rule.

5.2 Practical Example

March 2018: Aria buys and moves into an apartment in Fitzroy
April 2020: She relocates to Sydney and rents out the Fitzroy flat
May 2026: She sells the apartment

Although she rented it for more than 5 years, the period of income producing use did not exceed 6 years, so the entire capital gain remains exempt.

5.3 Key Conditions

You must not elect to treat any other property as your main residence during the same period
If you turn the property into vacant land (for example via knock down rebuild) different timing rules apply
The 6 years reset to zero if you move back in and establish residence again

6. Moving, Building and Temporary Circumstances

The law offers further concessions that interact with the 6 year rule:

Buying Before Selling

You can treat both dwellings as your main residence for up to 6 months to allow settlement overlap.

Building or Renovating

Land tax deferred for up to four years, then retrospectively exempt once you move in and occupy six continuous months.

Overseas Assignment

You may retain the CGT exemption for the first 6 year absence, but watch for new rules limiting foreign residents after 30 June 2020.

7. Do You Pay Land Tax on Your Primary Residence?

In Victoria, land tax applies to all property you own at midnight on 31 December each year, except land that qualifies for an exemption. Your principal place of residence is fully exempt if:

you occupied the home for at least 6 continuous months in the year preceding the assessment
you did not let it out on Airbnb or similar for more than 6 months in that year
your spouse does not claim a PPR exemption anywhere else in Australia

Source: State Revenue Office

You therefore do not pay land tax on your genuine family home. The exemption is not automatic forever; you must notify the SRO if you move out permanently, lease it long term or turn it into a holiday house. Failing to update your status can result in assessments for past years plus penalty interest.

8. Common Scenarios and How To Handle Them

8.1 Renting Out a Room on Airbnb

Letting out one room while you still live in the property does not disqualify the CGT main residence exemption, but the ATO may assess CGT on the proportion of floor area and days used to generate rental income. Keep detailed diaries of guest stays and floor-plan measurements.

8.2 Living in the Home of Your Spouse or Partner

A couple may own two homes, but from 1 July 2021 they must choose only one dwelling to be the main residence for both spouses. Make a written election and store it with your records.

8.3 Moving for Work Interstate for Four Years

Use the 6 year rule. Maintain evidence such as Victorian driver's licence renewal, keep personal belongings at the Melbourne property and consider voting via postal vote using your home address.

8.4 Knock Down Rebuild

Apply for the construction PPR exemption to defer Victorian land tax while the new dwelling is built, then move in within four years of demolition.

9. Tips To Stay Compliant and "Audit Ready"

Create a digital folder labelled with the property address and tax year
Scan or download every rates notice, utility bill and insurance policy once received
Update addresses promptly with the ATO via MyGov, VicRoads and the electoral roll
Record absences: note dates you move out and back in, especially if renting the property
Keep lease agreements if you rent the property out these prove the start and end of the 6 year clock
Consider a statutory declaration if circumstances were unusual (for example hospitalisation) and supporting documents are thin
Engage a conveyancer or tax adviser early if contemplating sale; they can run a "pre-sale PPR proof audit" and flag gaps

10. Frequently Asked Questions

Q1. Can I use the 6 year rule more than once?

Yes. Each time you reestablish your home in the property the 6 year period resets. For instance, you could rent it for five years, live back in it for a year, then rent it for another 6.

Q2. My land is 4.5 hectares but the house sits on two hectares can I split the title?

Possibly. Subdividing may allow the dwelling to qualify for the full CGT exemption on the smaller lot, but professional advice is essential because of stamp duty and planning implications.

Q3. I am building a granny flat for my parents will the land remain exempt?

Yes, provided the combined land area is under two hectares and you or an immediate family member use the land as their PPR.

Q4. Do utility bills need to be in my sole name?

Joint names are fine. What matters is regular residential level consumption pointing to genuine occupation.

Q5. The SRO is charging vacant residential land tax does my PPR exemption protect me?

If you live in the dwelling at least 6 months per year the property is exempt from both land tax and the vacant residential surcharge.

11. Conclusion: Protect Your Exemptions And Get Expert Help

Your home is likely your biggest asset, and the tax concessions attached to it can be worth hundreds of thousands of dollars. Yet those concessions rely on your ability to prove that the dwelling is, or was, your principal place of residence. By keeping thorough records, understanding the 6 year rule and notifying the SRO when circumstances change, you can sleep soundly knowing you have met every requirement.

If you are unsure about your position or are preparing to sell, professional guidance pays for itself many times over. The experienced team at Pearson Chambers Conveyancing are here to help you:

review your Section 32 vendor statement for compliance
check that your evidence file is watertight
lodge or maintain your PPR exemption with the SRO

Call Pearson Chambers Conveyancing today on 03 9969 2405 or email contact@pearsonchambers.com.au for a complimentary Section 32 review and tailored advice on safeguarding your main residence concessions.