For property investors purchasing established dwellings after 12 May 2026, negative gearing losses will no longer be deductible against ordinary income. We know that now. We also know that most of the existing structures are no longer viable.
Except for the 6 Year Rule, that magic still remains untouched.
Amid the chaos and upheaval, one provision remains unchanged and underutilised: the main residence absence rule, commonly called the 6 year rule. Under the Income Tax Assessment Act 1997, a homeowner who vacates their principal place of residence and rents it out may continue to treat it as their main residence for CGT purposes for up to six continuous years. Critically, this is not a discount, it is a full exemption. A property sold within that window, with no other property nominated as a main residence, attracts zero CGT liability.
This distinction matters more now than it did before the budget. Under the old 50% discount, investors holding a property for over 12 months still faced a meaningful tax event on sale. Under the incoming indexed cost base regime, high growth assets will attract more tax, not less, particularly those held over long periods with gains well above inflation. The 6 year rule cuts through both frameworks entirely.
The strategy is not without constraints, but also has some very handy details worth knowing. The clock resets only if the owner moves back in before the six years elapse. There is no timeframe on how long you must move back in for. However, investors cannot simultaneously claim two properties as their main residence, and the rule does not apply to investment properties that were never an owner-occupied principal place of residence.
If you're keen to check out other places, an interstate relocation or extended travel, converting your principal place of residence into a rental while the absence clock runs represents a legitimate, ATO-sanctioned path to preserving full CGT exemption, regardless of what the new discount rules say.
This is general information only and does not constitute financial or tax advice. Consult a registered tax agent regarding your specific circumstances.
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