Are you looking for ways to reduce your capital gains tax (CGT) liability? The 6-Year Rule in Australia offers a fantastic opportunity to do just that. By understanding and utilising this rule effectively, you can potentially save a significant amount of money on your taxes. In this article, we’ll provide a detailed example to illustrate the benefits of the 6-Year Rule as a tax deduction and explain how Aero Accounting Group can help you take advantage of this strategy.

What is the 6-Year rule?

The 6-Year Rule allows you to treat your primary residence as your main residence for CGT purposes for up to six years, even if you’re not living in it. This means that if you move out of your property and either rent it out or leave it vacant, you can still claim the CGT exemption that typically applies to your primary residence.

Example Scenario:

Let’s consider a hypothetical scenario to demonstrate the potential tax savings using the 6-Year Rule. Sarah purchased a property in 2017 and lived in it as her primary residence until 2020. However, in 2021, she got a job opportunity in another city and decided to move, leaving her property vacant. Instead of selling the property immediately, Sarah decides to take advantage of the 6-Year Rule.

Over the next five years, Sarah continues to own the property but doesn’t live in it. During this time, the property appreciates in value. In 2026, she decided to sell the property. Thanks to the 6-Year Rule, Sarah can claim the CGT exemption for the entire six-year period (2021-2026), effectively reducing her tax liability.

Tax Deduction Benefits:

By utilising the 6-Year Rule, Sarah can enjoy the following tax deduction benefits:

• Extended CGT Exemption: Sarah can claim the CGT exemption for the entire six-year period, even though she hasn’t been living in the property. This allows her to save a significant amount of money on her capital gains tax.
• Maximising Property Appreciation: During the six-year period, the property’s value increased. By selling the property after six years, Sarah can benefit from the appreciation without having to pay capital gains tax on it.
• Flexibility for Lifestyle Changes: The 6-Year Rule provides flexibility for individuals who need to move due to work, family, or other circumstances. It allows them to retain their primary residence status for tax purposes, even if they can’t physically reside in the property.

Navigating CGT regulations and maximising the benefits of the 6-Year Rule can be complex. That’s where Aero Accounting Group comes in. Our team of experienced tax professionals specialises in CGT matters and can provide personalised advice tailored to your specific situation. They can help you keep accurate records, ensure compliance with CGT regulations, and guide you through the process of optimising your tax deductions.

Ready to minimise your capital gains tax and maximise your tax deductions using the 6-Year Rule? Contact Aero Accounting Group today to schedule a consultation. Our experts will provide the guidance and support you need to make the most of this tax-saving strategy. Don’t miss out on the opportunity to save money on your taxes—take action now!