The ATO has released draft guidance signalling a tougher approach to holiday homes used partly for short term‑term rentals. The focus is on distinguishing genuine investment properties from lifestyle assets with incidental rental income.
If a property is treated as a personal holiday home, the ATO may deny deductions for interest, rates, land tax and maintenance—even where some rental income is earned. In many cases, only limited direct costs may be claimable.
Properties reserved for private use during peak periods, advertised inconsistently, or generating ongoing losses are under particular scrutiny. Where deductions are allowed, expenses must be apportioned on a fair and reasonable basis, with strong records essential.
The proposed changes are intended to apply from 1 July 2026. Therefore, now is the time to review how your property is used, priced, and documented, to avoid any costly surprises.