Selling an Investment Property in Australia: Tax, Tenants and Timing (2026)

Selling an investment property involves three distinct moving parts that rarely move at the same speed: the tax position you need to understand before you act, the tenancy obligations you must meet before you can settle, and the timing decisions that sit across both. This article covers each in turn, with pointers to your accountant and solicitor for the parts that turn on your individual circumstances.

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Part One: Tax

The tax treatment of an investment property sale is governed primarily by the capital gains tax (CGT) rules. The key variables are how long you have owned the asset, whether it was ever your main residence, and what depreciation you have claimed. All of these interact, and the right starting point is always a conversation with your accountant.

The CGT Discount

The ATO's CGT discount page states that Australian resident individuals are entitled to a 50% discount on a capital gain where the asset was held for at least 12 months before the CGT event, excluding both the acquisition day and the event day. In practical terms, this means a gain of $200,000 on a property held for more than 12 months would be reduced to $100,000 before being added to your assessable income.

Companies cannot use the CGT discount. The ATO notes the discount is also reduced for foreign and temporary residents in respect of gains arising after 8 May 2012. If you are not an Australian resident for tax purposes, speak to your adviser before assuming the discount applies.

When the CGT Event Happens

Timing matters here. The ATO's CGT events page states that where there is a contract of sale, the CGT event happens on the contract date, not settlement. The date you sign and exchange contracts determines which financial year the gain falls into, even if settlement happens months later. If you are considering a sale near the end of a financial year, the contract date is what governs.

The 6-Year Rule

The ATO states that a former main residence can continue to be treated as your main residence for CGT purposes for up to six years if it produces rental income during your absence (indefinitely if it is not income-producing). This means a property you once lived in and then rented out may still be fully CGT-exempt, subject to conditions.

The key constraints are:

• Only one property can be treated as your main residence at a time, with an overlap allowance of up to six months when you are in the process of moving.
• The six-year clock resets each time you move back in and re-establish it as your main residence, then leave again.
• Beyond six years of income production in a single absence, CGT applies to the excess period. The cost base is reset to market value at the time it first began earning income, and the gain is calculated from that point.

The 6-year rule is one of the more valuable provisions available to property investors, and also one of the more easily misapplied. Get a specific ruling from your accountant before relying on it.

Depreciation and Balancing Adjustments

If your investment property contains depreciating assets (appliances, carpet, hot water systems and so on), selling the property triggers what the ATO's Rental Properties 2025 guide describes as a balancing adjustment event. The proceeds are apportioned between the building and the depreciating assets, and the difference between the termination value and the adjustable value of each depreciating asset is either assessable income or a deduction.

In simple terms: if you have been claiming depreciation on an asset that is then sold for more than its written-down value, you may have a gain to declare. A quantity surveyor can help you quantify outstanding depreciation, and your accountant handles the tax treatment. Do not overlook this step in the pre-sale planning process.

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Announced Changes You Need to Know About

The 2026-27 Federal Budget announced proposed changes to the CGT discount rules that would take effect from 1 July 2027. These are announced policy and not yet law as at June 2026.

The Government has stated it intends to replace the 50% CGT discount with an inflation-based discount and a minimum 30% tax on gains, applying only to gains arising after 1 July 2027. Gains realised before that date would continue to attract the current 50% discount. Investors in new builds would have the option to choose either the new or existing treatment.

The Budget also announced that negative gearing would be limited to new builds from 1 July 2027, with existing arrangements remaining unchanged for properties held before Budget night.

The Budget page at budget.gov.au is the source for these proposals. Until legislation is passed, the existing rules apply. Anyone considering the timing of a sale in light of these announcements should speak to their accountant; there are legitimate reasons to move sooner or later, and the right answer depends entirely on individual circumstances. This article does not recommend a timing decision.

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Part Two: Tenants

Selling a tenanted investment property requires formal notice to be given, and the rules differ by state. Getting notice wrong can delay your sale, expose you to tenant claims, or invalidate the notice entirely. Your solicitor or conveyancer should review your tenancy situation before you go to market.

Notice Periods by State

The table below summarises the current minimum notice requirements for a sale requiring vacant possession in three major states. Other states have their own rules; always check the relevant state tenancy authority.

State	Agreement Type	Notice Period	Key Conditions
NSW (post 19 May 2025)	Fixed term (6 months or less)	60 days	Notice before contracts requiring vacant possession are exchanged
NSW (post 19 May 2025)	Fixed term (longer than 6 months)	90 days	Same
NSW (post 19 May 2025)	Periodic agreement	90 days	Same
NSW (all types)	Once contracts requiring vacant possession are exchanged	30 days	All agreement types
VIC (Consumer Affairs Victoria)	Any	Minimum 90 days (increased from 60)	Notice invalid without evidence attached (signed contract or agent engagement authority); cannot end a fixed term early for sale; property must not be re-let within 6 months of notice without VCAT approval
QLD (RTA Queensland)	Periodic or fixed-term general tenancy	2 months	Cannot end a fixed term early; the later of the agreement end date or the 2-month notice period applies

NSW: The New South Wales Government updated notice requirements from 19 May 2025. Once contracts requiring vacant possession are exchanged, notice reduces to 30 days for all agreement types. The initial notice (before exchange) depends on the agreement type as shown above.

VIC: Consumer Affairs Victoria sets the minimum at 90 days, up from the previous 60. The notice is invalid unless supporting evidence is attached: either a signed contract of sale or an agent engagement authority demonstrating the property is genuinely being marketed. A fixed-term tenancy cannot be ended early because the landlord wants to sell.

QLD: Under the RTA Queensland rules, a sale-contract notice to leave is two months for both periodic and fixed-term general tenancies. A fixed term cannot be ended early for sale; the later of the agreement end date or the two-month notice period governs.

Practical Implications of Selling with a Tenant

The notice rules have direct consequences for your sale timeline. If you have a tenant on a long fixed term and the sale requires vacant possession, you may not be able to settle until their agreement ends. Factor this into any settlement date you negotiate with a buyer.

Open inspections with a tenant in place require cooperation. Most tenancy legislation gives tenants the right to reasonable notice before inspections and limits the frequency. A cooperative tenant makes the process significantly easier; it is worth having a direct conversation early rather than relying solely on formal notice requirements.

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Part Three: Vacant vs Tenanted Sale

Not every investment property needs to be sold with vacant possession. The decision between selling vacant or with the tenant in place depends on who your target buyer is.

A vacant property is typically more attractive to an owner-occupier buyer: they can move straight in or renovate without coordinating around a lease. In an owner-occupier-dominated market, that may produce a better outcome.

A tenanted property with a lease in place and a reliable rental history is often attractive to an investor buyer. From day one, the new owner receives rental income without a vacancy period. Buyers agents frequently act for investor buyers who are looking for exactly this profile.

If your property is currently tenanted and you do not want to go through the notice process (or if the timing of vacant possession does not suit your plans), selling through a buyers agent network may be the more practical path. See selling to investors through a buyers agent network for how that process works.

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Timing Considerations

Several timing decisions intersect when selling an investment property:

CGT event date vs financial year. As noted above, the contract date determines the financial year in which the gain falls. If you are close to a financial year end and the gain is significant, a few days' difference in when you exchange can shift a large tax bill between years. Your accountant can run the numbers.

The proposed 1 July 2027 change. As discussed above, gains arising from 1 July 2027 may be subject to a different discount if the announced policy passes into law. Gains realised before that date keep the current 50% discount. Do not act on this without speaking to your accountant.

Tenant notice vs settlement date. Ensure the earliest possible settlement date your buyer can be offered accounts for the full notice period. Trying to bring settlement forward after notice has been served can put you in breach of tenancy obligations.

Depreciation schedule review. Commission a depreciation schedule review from a quantity surveyor before sale if you have been claiming depreciation. The balancing adjustment needs to be calculated before your tax return is lodged; a pre-sale review avoids surprises.

You can model the cost components of your sale using the cost of selling calculator.

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Where AgentBridge Fits

AgentBridge distributes investment properties to a national network of 80+ buyers agents, which means your property reaches investor-oriented buyers on day one rather than waiting for them to find a public listing. For a tenanted investment property, that network access is particularly relevant: buyers agents often represent clients who want an income-producing asset from settlement and are comfortable transacting without vacant possession.

If your property has a tenant in place and you want to sell without triggering the vacant possession notice process, a direct distribution to investor buyers through the AgentBridge network is worth exploring. If you do plan to sell with vacant possession, the network still reaches owner-occupier buyers through the agents representing them.

The AgentBridge distribution fee is transparent and typically 30 to 40% below a traditional agent's commission. To understand how distribution works and whether it suits your situation, visit /resources/how-property-distribution-works-sellers-developers or get in touch.

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General information only, not financial, legal or taxation advice and not credit assistance. Speak to your own broker, accountant or solicitor before acting on anything here.