Holiday Home Tax Deductions Are Changing: What Owners Need to Know Before 1 July 2026
- G&A Editorial Team
- 3 days ago
- 4 min read
If you own a holiday home in Australia - a beach house, a country cabin, or a city apartment listed on Airbnb or Stayz - the ATO has finalised new rules that could wipe out your deductions entirely.
What changed
The ATO finalised Taxation Ruling TR 2026/1 along with Practical Compliance Guidelines PCG 2026/2 and PCG 2026/3 in May 2026. Together they clarify how holiday homes are taxed, with heightened compliance focus from 1 July 2026. You can read the ATO's own guidance on Holiday homes.
How the ATO defines a holiday home
A holiday home is any property used, or held for use, for holidays or recreation - by you, your family, or your friends. This applies to beach shacks, snow lodges, or even a CBD apartment you occasionally use for city breaks.
The core test: mainly used to produce income
If your holiday home isn't used or held mainly to produce rental income, you lose deductions for ownership and use expenses including mortgage interest, borrowing expenses, council rates, water rates, body corporate fees, land tax, and repairs and maintenance. If you're unsure how this applies to your situation, our property and rental accounting service can help review your position.
Expenses that aren't classed as ownership or use costs - advertising, booking fees, and cleaning after a paying guest's stay - remain deductible to the extent they're incurred in producing rental income, even if the property doesn't meet the 'mainly income-producing' test. This doesn't apply to cleaning after you, your family, or friends have stayed there that cost isn't deductible.
5 things holiday-home owners should check now
Peak-season availability
Blocking out Christmas, Easter, or school holidays for personal use is a red flag, since these are the periods you'd normally earn the strongest rent.
Genuine advertising and market pricing
Listing a property at an unrealistic price, or on a site with very limited reach, may not count as being genuinely available. Keep records of comparable pricing and listing history.
Family and friend arrangements
Free or heavily discounted stays for relatives should be recorded. Rent below market value limits deductions to the amount of rent actually received.
Restrictive rental conditions
Refusing reasonable enquiries, imposing unusual conditions, or advertising through very limited channels can all suggest the property isn't genuinely for rent.
Joint ownership splitting
If you co-own the property with a spouse, income and deductions must be split according to actual ownership share, not shifted to the higher-earning partner.
A practical example
Take an owner with a two-bedroom unit in Rockingham. They list it on Stayz for most of the year but keep the calendar closed for Christmas, Easter, and the WA school holiday periods, so extended family can stay for free. Occupancy looks reasonable on paper - the unit shows as "booked or unavailable" a lot of the time. But under the ATO's approach, what matters isn't how full the calendar looks; it's why it's full. Consistently reserving the exact dates when short-stay demand (and rent) peaks, for unpaid family use, points toward a leisure facility rather than a genuine rental.
Now compare an owner with a similar unit who keeps it open year-round at market rates, occasionally has a slow week with no bookings despite genuine advertising, and lets family stay only outside high-demand periods (and pays a fair market rate when they do). That pattern supports a much stronger claim that the property is mainly held to produce income.
What still isn't deductible, even for a genuine rental
Initial repairs for damage that existed when you bought the property (claimed over several years instead)
Travel to inspect or manage the property (no longer deductible since 1 July 2017)
Costs actually paid by the tenant, not you
Interest on loan funds redrawn for private purposes
Transitional relief
The ATO won't apply compliance resources to expenses incurred before 1 July 2026, provided the arrangement was entered into before 12 November 2025. From 1 July 2026, expect closer scrutiny - including data-matching with platforms like Airbnb and Stayz.
Pre-peak-season checklist
Review your 2026–27 booking calendar, especially peak periods
Compare your advertised rate against genuinely comparable properties
Record every private, family, or discounted stay as it happens
Keep platform statements, enquiries, cancellations, and listing history
Separate direct guest costs from general ownership costs in your bookkeeping
Talk to your accountant before lodging your 2025–26 return
Quick FAQ
Can I still use my holiday home privately and claim deductions?
Possibly - but private use, especially during peak periods, affects how much you can claim and whether the leisure-facility rules apply at all.
Does listing on Airbnb automatically make it "available for rent"?
No. Pricing, booking conditions, peak-season access, and your actual conduct all matter.
What if family pays some rent?
It's still assessable income, but deductions may be limited if the rent is below market rate.
Disclaimer: This post contains general information only and does not constitute specific tax or financial advice. Please consult a registered tax agent regarding your specific circumstances.
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