If you have a holiday home, the ATO is now paying much more attention to the deductions owners are claiming. They’re taking a stricter approach, so even if you rent the property out from time to time, you might find that some of the deductions you’ve been used to claiming are no longer accepted. The rules are becoming tighter, and that means holiday-home owners need to be more careful about how they report their expenses.
Who’s affected
These changes are aimed at owners who use their holiday homes for both personal breaks and rental income. If your place is enjoyed more as a getaway than it is made available to paying guests, the ATO may treat it as a personal-use property. When that happens, some of the expenses you normally claim might no longer qualify as tax deductions.
Expenses you might need to rethink
Typical costs that could be affected include:
- Mortgage interest on the property
- Council rates and land tax
- Repairs, maintenance, and upkeep
Even short-term rentals might not guarantee deductions if your home is mostly for personal use.
How to figure out what you can claim
The ATO wants deductions split fairly between personal use and rental use. You can do this based on:
- Days rented versus days used privately
- How much of the property is rented versus kept for yourself
- A combination of both
Whatever method you choose, make sure it’s reasonable and well documented.
Why it matters
If your holiday home is seen as mostly for personal use, the ATO could reject deductions you might have assumed were okay. This could affect planning for both existing properties and future purchases.
What you can do now
The ATO isn’t looking to challenge past claims, as long as your rental arrangements were in place before 12 November 2025. But from 1 July 2026, these new rules will start to have real effect.
Talking to our tax experts at Chan & Naylor now can help you work out exactly what deductions you can claim and make sure you avoid any unexpected issues with the ATO. Reach out to us today for personalised guidance on your holiday home.
About Chan & Naylor
Since 1990, Chan & Naylor has partnered with business owners and property investors in managing their taxes and building tax-effective wealth. Choosing Chan & Naylor means you’re not just selecting a service provider; you’re gaining a partner aligned with your financial goals. You’ll have access to a dedicated client manager supported by a team of accountants who specialise in business and property tax.
Disclaimer
This article provides general information only and may not take into account your individual circumstances. For personalised and strategic advice tailored to your situation, seek professional guidance from Chan & Naylor. Our experienced team can help you navigate Australian taxation requirements and ensure your strategies align with current regulations.
