Holiday Homes & Tax: What the ATO Has Changed
- Appleby

- 1 minute ago
- 3 min read

The Australian Taxation Office (ATO) has updated its rules on how holiday homes are treated for tax purposes. With more people renting out their beach houses, units and cabins on platforms like Airbnb, the ATO has replaced a 40‑year‑old ruling with new guidance. These rules explain when you can claim deductions and when you can’t.
This article breaks it down in simple, practical language.
Why the ATO Changed the Rules
Holiday homes have always been a grey area. Many owners want to claim deductions for interest, rates, insurance and repairs, even when the property is barely rented out. The ATO wants to tighten things up so deductions only apply when the property is genuinely available for rent on proper commercial terms.
The ATO has always said that if you block out peak periods like Christmas or school holidays for yourself, or charge unrealistic rent, the property is not considered genuinely available for rent.
What the Old Rules Allowed
Under the old system, deductions were based on time. For example, if your holiday home was rented for 18 days in a year, you could only claim 18/365 of your costs. You couldn’t claim anything for the days you used it yourself or left it empty.
What the New Rules Say
The ATO now classifies holiday homes as “leisure facilities.” Normally, the cost of owning a leisure facility is not deductible at all.
This means that under the new view, even the small percentage of deductions allowed under the old rules would no longer be deductible.
However, there is an important exception: you can still claim deductions if your holiday home is mainly used to earn rental income.
What “Mainly” Means
To work out whether the property is mainly used to earn income, the ATO looks at:
How often it is actually rented
Whether it is genuinely available during peak times
Whether the rent you ask is realistic
Whether you reject bookings without good reason
Whether you block out peak periods for personal use
Advertising the property helps, but only if the price is fair and the home is truly available.
Time is still important, but the ATO also looks at your behaviour and intentions.
How Deductions Will Be Calculated
If you pass the “mainly used to earn income” test, you can claim a portion of your costs.
The ATO says deductible days include:
Days the home was actually rented
Days it was vacant but genuinely available for rent
This makes it worthwhile keeping the property available during peak periods.
Temporary Relief for Existing Owners
Because this is a major change, the ATO has said it will not enforce the new stricter rules for properties owned before 12 November 2025, for income years ending 30 June 2026 or earlier.
This gives current owners some breathing room.
Record‑Keeping Requirements
Holiday home owners should keep detailed records, including:
Logs of rental use and private use
Evidence of market‑based pricing
Booking acceptances and rejections
Proof that peak periods were not blocked out for personal use
Good records will be essential if the ATO reviews your claims.
Final Thoughts
Yes, the rules are tighter and deductions may be smaller. But owning a holiday home isn’t just about tax. There are memories, lifestyle benefits and personal enjoyment that can’t be measured in dollars.
At Appleby Accountants, we’re here to help you understand how these changes affect you and to guide you through the rules with clarity and confidence.
Five Key Points
The ATO has replaced old holiday‑home tax rules with stricter new ones.
Holiday homes are now treated as “leisure facilities,” meaning costs are normally non‑deductible.
You can still claim deductions if the property is mainly used to earn rental income.
To qualify, the home must be genuinely available at commercial rates, especially during peak seasons.
Good records are essential, and older properties get a temporary grace period until 30 June 2026.




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