The Australian Taxation Office has finalised new guidance on the tax treatment of rental properties, with particular attention being given to holiday homes that are also rented out.
The new guidance follows draft material released late last year and is particularly relevant to owners of coastal, country, ski-area or short-stay accommodation properties that are used privately for part of the year and rented out through platforms such as Airbnb, Stayz or local agents.
The key message is that it is no longer enough simply to say that a holiday home is “available for rent”. The ATO will look closely at how the property is actually used, when it is available, and whether the owner has genuinely prioritised income-producing use.
Where a property is used as a private holiday or leisure facility, deductions for ownership and holding costs may be denied, rather than merely apportioned. This can include significant costs such as interest, council rates, land tax, insurance, repairs and other holding expenses.
A particular risk arises where the owner blocks out the best rental periods for private use. For example, a beach house made unavailable over Christmas, New Year, Easter or school holidays may be difficult to characterise as being held mainly to produce rental income, even if it is technically listed for rent at other times. Similarly, a ski lodge reserved for family use during peak winter periods may attract ATO scrutiny.
The ATO has indicated that the question is not purely mathematical. Counting private-use days against rental days will not necessarily be enough. The quality of the time matters. Private use during peak holiday periods may carry far more weight than occasional off-season use.
Owners should also be careful about arrangements that suggest the property is not genuinely available to the public. Warning signs include excessive rents, restrictive booking conditions, limited advertising, rejecting reasonable rental enquiries, or mainly allowing use by family and friends.
Where the property is genuinely rented or available for rent, expenses may still need to be apportioned between income-producing and private periods. Good records will therefore be essential, including booking calendars, blocked-out dates, rental listings, agent correspondence, evidence of market rates and details of any private use.
The ATO has provided some transitional compliance relief for periods before 1 July 2026, but owners should not assume that past practices will remain acceptable.
Anyone with a holiday home that is also rented out should review their arrangements now, particularly before the next peak holiday season.