Currently a market value rule applies when a former home is first rented after August 1996, to invoke as its cost base and deemed acquisition date, the market valuation at the date of first rental.
But many taxpayers first use a property as an investment, and then move into it as their home, and can never enjoy the maximum opportunity of the main residence exemption. For instance, if they add value to the property with an extension/renovation, they effectively increase the embedded CGT exposure they have on the property.
A taxpayer should be able to choose, to invoke a market valuation upon the property becoming their main residence, pay any tax (if the value has increased), and then have no future taxation exposure on further accretions in value.
This would (1) provide more freedom to the taxpayer (2) be in keeping with the way the market value rules apply, noted above (3) allow the Government to collect revenue that is often forgotten/lost anyway, many years down the track when the property is eventually sold.