Vacancy Allowance

Plain-English definition. A vacancy allowance is a modelling assumption that reduces scheduled rent for periods when a property may not have a paying tenant. It helps turn advertised rent into a more conservative effective-rent estimate. It is not a guaranteed vacancy rate for a property.

The calculation. Multiply scheduled annual rent by one minus the vacancy allowance. At $650 a week, scheduled annual rent is $33,800. A 3% allowance reduces the modelled rent by $1,014, leaving $32,786 before management fees and other costs.

A percentage can also be translated into time for a sense check. A 2% annual allowance is about 7.3 days, while 4% is about 14.6 days. That does not mean vacancy arrives in neat blocks or that the next tenancy will follow the average.

How to choose an assumption. Start with evidence for comparable properties in the same local market, then consider the lease end date, time needed for advertising and repairs, property type, asking rent, seasonality and tenant turnover. ASIC Moneysmart recommends considering local vacancy rates when assessing an investment property. A published suburb or city rate is context, not a property-specific forecast, so test more than one scenario.

Use the Investment Property Yield Calculator to compare a base case with a longer vacancy. For example, changing the allowance from 2% to 6% on $650 weekly rent reduces effective annual rent by another $1,352. Keep management fees, strata, land tax, maintenance, insurance and finance costs as separate inputs.

Do not treat the allowance as tax advice. The Australian Taxation Office uses different tests when considering rental income and deductions. It says some expenses may be deductible while a property is not occupied if it is genuinely available for rent, but the facts and the type of expense matter. A percentage entered in a yield model does not decide deductibility.

Sources. ASIC Moneysmart: Buying an investment property, updated 30 June 2026; and ATO: Rental properties guide 2025, including the guidance on periods rented or genuinely available for rent. Sources checked 4 September 2026.

This entry provides general information and a modelling method only. It is not financial advice, investment advice, tax advice, a rent forecast or a recommendation about a property.

Last updated: 4 September 2026.