What is the 6 year rule for rental property?

The "six-year rule" in Australia allows property owners to treat their former primary residence as their main residence for Capital Gains Tax (CGT) purposes for up to six years after they move and rent it out as an investment.

Key Points of the Six-Year Rule

1. Primary Residence Requirement - to qualify for the six-year rule, the property must have been your primary residence before you started renting it out.

2. Six-Year Period - you can rent out your primary residence and still treat it as your main residence for CGT purposes for up to six years. During this period, any capital gains made on the property are exempt from CGT.

3. Temporary Absence - the six-year rule applies if you are temporarily absent from your primary residence. You do not need to live in another property that you treat as your main residence during this period.

4. Resetting the Period - if you move back into the property and live in it as your main residence, the six-year period can reset. You can then move out and rent it out again, potentially starting a new six-year exemption period.

5. No Limit on Use - there is no limit on the number of times you can use the six-year rule, as long as you re-establish the property as your main residence between rental periods.

6. Property Not Rented - if the property is not rented out and remains unoccupied, you can still treat it as your main residence indefinitely, with no time limit, for CGT exemption purposes.

The six-year rule can offer significant tax advantages for property owners who rent out their former primary residence, but it's essential to understand and comply with the specific requirements and conditions to benefit fully. DPN recommends you work with a qualified accountant to ensure this meets your individual financial needs and personal situation.

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