The Australian Taxation Office (ATO) has released new draft guidance that changes the way deductions will work for holiday homes that are also used for private purposes. These changes could affect many people who rent out their beach house, mountain getaway, Airbnb, farm stay, or any short-stay accommodation they also enjoy personally.

These changes will apply regardless of how the property is rented — whether privately, through a real estate agent, or via platforms such as Airbnb or Stayz.

If you currently claim deductions for your holiday home, it’s important to understand what’s coming and how it may affect you.

What Is the ATO Changing?

The ATO now intends to treat some holiday homes as “leisure facilities”. This places them in the same category as private boats and aircraft, where deductions are only allowed if the asset is used mainly for producing rental income.

This means expenses such as:

• interest
• council rates
• insurance
• cleaning
• maintenance and repairs
• property management fees
• depreciation

may no longer be deductible unless the ATO accepts that your holiday home is used mainly to earn rental income.

How Will the ATO Decide “Mainly”?

Rather than counting days available, the ATO will apply a broader commercial and behavioural test under the new draft rulings.

1. Availability During Peak Times

For homes in popular holiday destinations, the ATO may deny deductions if the property is blocked out for private use during high-demand periods (school holidays, long weekends, summer).

2. Genuine Commercial Behaviour

The ATO will look at whether the property is being managed in a way that shows a real intention to earn income, including:

• realistic market-based pricing
• good-quality advertising
• prompt responses to enquiries
• reasonable and not overly restrictive booking conditions
• a listing that encourages bookings rather than deters them

3. Personal Use and Blockouts

Heavy owner use — especially in peak periods — could suggest the primary purpose of the property is lifestyle, not income production.

Transitional Relief Until 1 July 2026

The ATO recognises this is a substantial change in interpretation.
To assist property owners:

The ATO will not review holiday home deductions under these new rules for expenses incurred before 1 July 2026, provided:

• the rental arrangement existed before 12 November 2025, and
• the property was genuinely being offered for rent.

This transitional period offers an opportunity to adjust and plan before the stricter rules begin.

What You Should Do Now

If you own a holiday home that you rent out—even occasionally—these new rules may restrict the deductions you can claim moving forward.

Now is a good time to:

✔ Review how and when your property is made available for rent
✔ Check your listing to ensure it looks commercial and competitive
✔ Minimise private blockouts during high-demand times
✔ Keep good records of enquiries, availability and pricing decisions
✔ Speak with me about how these changes apply to your situation

How I Can Assist

I work closely with clients who own holiday homes, Airbnb properties, and short-stay rentals, and these new ATO views will have real implications for tax planning, cashflow, and long-term property strategy.

I can help you:

• assess your current practices against the new rules
• identify any risk areas the ATO could challenge
• update your rental approach to protect your deductions
• document your income-earning intention (important for future audits)
• plan for mixed-use property tax and CGT consequences

Do you own a holiday home or are thinking about buying one, now is the right time to get advice. If you’d like to talk through what this means for you, please get in touch with the Divergent Numbers team.