What section 118-192 does
Section 118-192 of the ITAA 1997 applies where you would otherwise get only a partial main residence exemption because the dwelling produced income during your ownership period; that income-producing use first occurred after 7.30pm ACT legal time on 20 August 1996; and you would have got a full exemption had a CGT event happened just before that use began.
Where all three conditions are met, you are taken to have acquired the dwelling at the income time for its market value at that time. Your actual purchase price stops being relevant, and so do the acquisition costs — the market value replaces the cost base rather than being added to it.
It is not a choice
This is the point most commonly misunderstood. Where the conditions are met the reset applies automatically — you cannot elect out of it because the market value happens to be lower than your purchase price. Owners who first rented in a soft market are sometimes worse off under the rule than they would have been on their actual cost, and there is no relief for that.
Because it is compulsory, the valuation is not optional either. The figure has to be established, and the further the date recedes the harder and more expensive that becomes.
How it interacts with the six-year rule
The two provisions work together and the order matters. If you make the absence choice under s118-145 and the dwelling stays fully exempt for the whole ownership period, there is no partial exemption — so s118-192 never engages and no valuation is needed.
It engages when the exemption becomes partial: the absence exceeded six years, or you chose to cover a different dwelling for part of the period, or part of the home was rented while you still lived there. At that point the deemed market value at first income-producing use becomes the starting figure for the apportionment.
Which day is the "income time"?
The statute refers to the first time the dwelling was used for the purpose of producing assessable income. In the ordinary case that is when it was first genuinely available for rent — advertised and ready — rather than the day a tenant moved in, and the distinction can matter in a fast market.
Where preparation work delayed the first tenancy, the position is arguable and it is a question for your tax agent rather than for us. Tell us the date you want us to value to; we will value to it and state it plainly on the face of the report.
If you are moving out this month
Obtain the valuation now. A valuation effective today, prepared today, with an internal inspection of the property in its current condition, is the strongest and cheapest version of this report you will ever be able to get. Ours start at $440 including GST for a standard metropolitan residential property.
If you are not going to commission one, at minimum create a record: date-stamped photographs of every room and the exterior, the rental listing, the signed lease, and any renovation invoices. It will materially reduce the cost and improve the quality of the retrospective report you may need in a decade.