Holiday Home Tax Deductions Australia: What The New ATO Guidance Means For Property Owners
- Future Accounting
- Jun 2
- 4 min read
Written by: Melissa Cunliffe
Following our earlier article on the proposed ATO changes to holiday home tax deductions, the Australian Taxation Office has now finalised its position on how the existing leisure facility rules will apply to holiday homes and short-stay accommodation properties across Australia.
For many Australians with a beach house, ski lodge or coastal getaway listed on Airbnb or Stayz, the ATO’s updated guidance on holiday home tax deductions Australia-wide could significantly affect what expenses can be claimed moving forward.
Importantly, this is not a brand-new law. Instead, the ATO has now clarified how it intends to apply the existing leisure facility provisions in section 26-50 of the Income Tax Assessment Act 1997.
If your property is mainly used for personal lifestyle or recreation purposes, you may no longer be able to claim many of the deductions previously available.
What has changed for holiday home tax deductions in Australia?
Previously, many property owners believed that simply listing a holiday home online as ‘available for rent’ was enough to support broad tax deductions. The ATO’s finalised guidance now takes a much stricter approach.
The ATO will look beyond whether a property appeared on Airbnb or Stayz and instead assess how the property is genuinely used throughout the year. This includes examining private use, blocked-out peak periods, pricing practices and whether the property is genuinely operated to maximise rental income.
What is a leisure facility under the ATO rules?
Under the ATO’s finalised guidance, a holiday home can be treated as a leisure facility where it is used or held for use for holidays or recreation, including by family and friends at free or discounted rates.
The ATO applies an objective test, meaning it will assess the actual use of the property rather than simply relying on the owner’s stated intentions.
Which holiday homes are most at risk?
Properties may face increased scrutiny where owners reserve Christmas, Easter or school holidays for personal use, only rent casually during off-peak periods, or allow family and friends to stay free of charge.
Holiday homes in high-demand locations such as the Mornington Peninsula, Byron Bay, the Gold Coast and Noosa are expected to attract particular attention.
What tax deductions could be denied?
If a property is classified as a leisure facility, deductions for mortgage interest, council rates, land tax, insurance, repairs, maintenance and some depreciation claims may be denied.
However, direct rental-related expenses such as Airbnb commissions, cleaning costs, booking platform fees and guest consumables may still be deductible.
Why the ATO is increasing scrutiny on holiday homes
The rapid growth of short-stay accommodation has led to greater ATO scrutiny across the holiday rental sector.
The ATO’s concern is that some properties are primarily family holiday homes with occasional rental income, rather than genuinely commercial investment properties.
A practical example of the new ATO approach
Sarah owns a beach house on the Mornington Peninsula. She uses the property with family during Christmas and January, blocks out Easter and rents it on Airbnb for selected weekends during the year.
Previously, many owners assumed this arrangement would support broad deductions because the property was technically available for rent.
Under the ATO’s finalised guidance, the property may now be viewed primarily as a leisure facility, potentially limiting Sarah’s ability to claim interest, rates, insurance and maintenance deductions.
When does the stricter ATO compliance approach begin?
The ATO has confirmed transitional compliance treatment for some existing arrangements entered into before 12 November 2025.
Broadly, the stricter compliance approach is expected to apply more broadly from the 2026–27 financial year onward.
What holiday home owners should do now
Holiday property owners should review private use arrangements, maintain strong booking and advertising records, ensure market pricing is being applied and seek professional advice where required.
The stronger the commercial evidence supporting the property, the stronger the position for claiming deductions.
Frequently asked questions
Can I still claim deductions on my Airbnb property?
Possibly. However, the ATO will now closely examine whether the property is genuinely operated as a commercial rental property or mainly used for private recreation.
What is considered a leisure facility by the ATO?
A property used or held mainly for holidays, recreation or private enjoyment may be treated as a leisure facility under the ATO’s guidance.
Can I claim mortgage interest on a holiday home?
In some cases, yes. However, deductions may be denied where the property is primarily used for personal or family recreation.
Do the rules apply to Stayz properties?
Yes. The ATO’s updated approach applies broadly to short-stay accommodation properties, including Airbnb and Stayz listings.
Concerned about your holiday home tax deductions?
The ATO’s updated guidance could significantly affect holiday property owners across Australia, particularly where properties are partly used for personal enjoyment.
Our team can help you review your current deductions, assess ATO risk areas, improve record keeping and ensure your property arrangements are structured correctly moving forward.
Book an appointment with Future Accounting Group today and get tailored advice before the 2026–27 compliance changes take full effect.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
