The six-year rule, relating to the Capital Gains Tax (CGT) discount, determines whether a property held as an investment qualifies for a 50% discount on the capital gain when sold. It concerns periods where a property is *not* genuinely available for rent.
Currently in Melbourne, as of December 2025, this rule is frequently encountered by investors selling properties in the Eastern Suburbs. If an investment property is not genuinely available for rent for more than six years, the CGT discount may be denied. This doesn’t mean it wasn’t rented for six years, but rather that it wasn’t actively *offered* for rent during that time. For example, if a property is used for personal use for an extended period, or deliberately kept vacant without attempts to lease it, the discount could be affected. Sellers preparing in 2026 should gather records demonstrating genuine attempts to rent the property – advertising, rental appraisals (typically $300-$500 in the Eastern Suburbs), and letting agent correspondence. Fletchers’ experience shows that meticulous record-keeping is vital. We often advise clients to proactively document these details well before considering a sale. The ATO’s interpretation can be nuanced, and professional advice is always recommended. In 2026, buyers are also increasingly aware of potential CGT implications, which can influence offers.
Understanding the six-year rule is crucial for investment property sellers in Victoria to accurately calculate potential tax liabilities.