You can move into an investment property you have rented out, and it becomes your main residence from the day you live there. Interest on the loan stops being tax deductible, the lender may move you to an owner-occupier rate, and when you sell, capital gains tax usually applies only to the share of time it was rented, not the time you lived in it.
| Area | What changes |
|---|---|
| Loan rate | Ask the lender to reclassify it as owner-occupied, often a lower rate |
| Interest | No longer deductible from the day it stops earning rent |
| Capital gains tax | Partial exemption for the days it was your home |
| NSW land tax | Your home is exempt |
| Tenancy | The lease must end properly under NSW rules |
Can you get a lower rate on the loan?
Often. Investment loans are usually priced higher than owner-occupied loans. Once you live in the property, ask the lender to reclassify the loan; many will reprice it, sometimes after you show proof you live there, such as a driver’s licence or utility bills at the address. If yours will not, an owner-occupier refinance may be worth comparing. The guide to asking for a better rate explains how.
What happens to the tax deductions?
From the day the property stops producing rent, interest, rates, insurance and repairs are private costs and no longer deductible. Depreciation stops too. Keep the records from the rental years, because they matter when you sell.
How is capital gains tax split when you sell?
The home first used to produce income rule does not help here, because the property was an investment first. Instead, the gain is usually apportioned: the days it was your main residence are exempt, and the days it was rented are taxable. A property owned for ten years, rented for the first five and lived in for the last five, would usually have about half its gain taxable.
For sales after 1 July 2027 the taxable part follows the new rules for the gain after that date; see the capital gains tax changes. Your tax agent works out the exact split.
A worked example
An investor bought a two-bedroom unit in the Inner West for $700,000 in 2021 and rented it for four years. In 2025 they ended the lease properly and moved in, then asked the lender to reprice the loan as owner-occupied. Their interest is no longer deductible, and the unit is now exempt from NSW land tax as their home. If they sell in 2033 after eight years living there, about four of the twelve years of ownership were rented, so roughly a third of the gain would be taxable.
What should you do before you move in?
- End the tenancy correctly under NSW law, giving the notice the lease requires.
- Get a valuation or appraisal for your records.
- Tell the lender and ask for owner-occupier pricing.
- Change the insurance from landlord to home and contents.
- Tell your tax agent the date it stopped earning rent.
What if you plan to rent it out again?
If you move out later and rent it again, the 6-year rule can apply to that later absence, because the property was your main residence before you left. The article on renting out your home explains how it works.
Does moving in change what you can borrow?
Yes, in both directions. Lenders stop counting the rent as income, which lowers your borrowing power for any other loan. On the other hand, the loan may move to a lower owner-occupier rate, and you no longer pay rent somewhere else, which lenders count as a saving. If you plan another purchase soon after moving in, have the numbers checked first, because losing the rental income can matter more than the rate cut.
Are you still a first home buyer?
No, if you have owned this property. Owning an investment property means you are not a first home buyer for the NSW transfer duty exemption or the First Home Owner Grant, and the 5% Deposit Scheme needs you not to have owned property in Australia in the last 10 years. If you are weighing whether to buy an investment first or a home first, the article on rentvesting sets out what each order costs you.
What mistakes cost people money?
- Moving in without telling the lender, and paying an investment rate for years.
- Claiming deductions after moving in, which the ATO can disallow.
- Losing the rental records you need to work out the taxable share when you sell.
- Ending a lease early without following the notice rules, which can lead to a tribunal claim.
Questions people ask
How long do I need to live in it before it counts as my home?
There is no fixed minimum in the law. What matters is that you genuinely live there: your belongings, your mail and your electoral enrolment are typical signs.
Can I still claim the interest after I move in?
No. Once the property stops earning rent and becomes your home, the interest is a private cost.
Will my lender lower the rate?
Many will reprice to an owner-occupier rate once you show you live there. If not, compare a refinance.
Does moving into an investment property avoid capital gains tax?
Not entirely. The years it was rented are still taxed when you sell; only the time it is your main residence is exempt. If you lived in it before you rented it out, the 6-year rule may cover the rented years instead. A registered tax agent can work out your share.
Charles Touma reviews the loan when your plans change, so the pricing matches how you now use the property. A free 30-minute call covers the switch and whether a refinance is worth it. General information only, not tax, legal or credit advice; speak with a registered tax agent about your own position.
Sources: ATO, using your home for rental or business; ATO, treating a former home as your main residence, checked 18 October 2026.
General information only, not credit, legal or tax advice. Your situation is assessed properly before any recommendation. Government scheme details change; figures are current at the time of writing.
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