Yes. Holding an investment property for more than 12 months entitles the owner to a 50% discount on the taxable portion of the capital gain. Additionally, the 6-year rule may allow owners to treat a former principal place of residence as their main residence for CGT purposes for up to six years.
The duration of ownership determines the tax efficiency of a sale, particularly for those who purchased between 2017 and 2020 and are now seeking to crystallise gains. With Victoria currently carrying Australia’s heaviest property tax burden in 2026, the timing of the sale is as critical as the holding period.
The 12-month CGT threshold
Properties held for more than 12 months qualify for a 50% discount on the taxable capital gain. For those who have held assets for shorter periods, the full gain is typically taxable at the owner’s marginal rate.
Principal residence and the 6-year rule
If a property was lived in as a principal place of residence before being rented, a partial exemption applies based on the number of days it was the main residence versus the total ownership period. The 6-year rule allows owners who move out of their PPOR to continue treating it as their main residence for CGT purposes for up to six years, provided no other property is nominated as a PPOR during that time.
Drivers of investor divestment in 2026
Many investors are selling due to the cumulative effect of land tax rises, VRLT expansion, and the Short Stay Levy. Net rental yields for inner-city Melbourne investors have been materially compressed (Forge Property, February 2026), while RBA rate rises from 2022–2023 have left some negatively geared investors with unsustainable cash flow.
The timing risk
Buyer urgency has dampened following RBA rate hikes in February and March 2026 (Domain). While vendor confidence improved through late 2025 and listings rose nearly 40% since December 2025 (Raine & Horne), the recent rate moves have introduced new caution into the market.
Frequently asked questions
How long does it take to sell an investment property in Melbourne?
A typical auction campaign takes four weeks from listing to auction day. Private sales for well-priced properties can occur within 1–2 weeks, while those requiring negotiation take 4–8 weeks. As of March 2026, properties are selling marginally faster than the decade average (Cotality).
What is the 6-year rule for capital gains tax?
This rule allows a homeowner to rent out their former principal place of residence and still claim a main residence CGT exemption for up to six years. This applies only if the owner does not nominate another property as their principal place of residence during that period.
When is the CGT event triggered during a sale?
The CGT event occurs on the date the contract is signed, not the date of settlement. While settlement in Victoria typically takes 30–90 days—with 60 days being the most common—the tax liability is determined by the contract date.
Why are more Melbourne investors selling in 2026?
Selling is driven by Victoria’s heavy tax burden, including congestion and absentee owner surcharges, and tenancy law reforms that reduced landlord flexibility. Many investors are also choosing to crystallise gains made between 2017 and 2020 despite subsequent price corrections.
Questions to ask your agent
- How have open for inspection attendances in this specific corridor changed since the February and March RBA rate hikes?
- Based on current stock levels, would a four-week auction campaign or a private sale better target owner-occupiers moving into this submarket?
- What does the recent data show regarding the price gap between investment-grade properties and owner-occupied homes in this area?
This article contains general market information based on data current as at April 2026. It does not constitute financial, legal, or real estate advice specific to your property or circumstances. For an appraisal and tailored advice, speak with a Fletchers agent in your area.