Holiday homes and rental properties: what the ATO's new guidance means for your 2026/27 claim
The ATO has finalised its rental-property guidance, and the test has shifted. What matters now is whether your property is genuinely held to produce income — not whether it appeared online or collected some rent. For owners of holiday homes, short-term rentals and mixed-use properties, the 2026/27 return should not be a repeat of last year's.
What has changed
The finalised guidance replaces the long-standing approach many owners and advisors had grown comfortable with. Under the new framework, a property that earns rent can still attract scrutiny where there is private use, family use, restricted availability, or thin commercial evidence behind the listing.
The practical consequence is a change in the question being asked. It is no longer "how many nights was it rented, and what proportion do we apportion?" It is "was this property genuinely available, on commercial terms, and can the owner show it?"
Why this is more than a private-use adjustment
Most owners expect that private use trims their deductions proportionally. That assumption is the risk. Deductions may not simply be reduced — in some cases the rules dealing with leisure facilities can put major holding costs at risk altogether.
Important
Where the leisure facility rules apply, the outcome is not a proportional reduction. The costs potentially at risk include:
- Interest
- Council rates
- Body corporate levies
- Insurance
- Repairs
- Capital works claims
For high-value coastal, regional or short-stay properties, where holding costs run into tens of thousands each year, that distinction can materially change the tax position.
Who this affects
Three ownership patterns are most exposed under the new framework. Select the one closest to your circumstances.
You rent the property during parts of the year but reserve school holidays, summer weeks or long weekends for family use.
The pattern of reserved periods matters as much as the total. Holding back the weeks the property would most reliably let is exactly what the new framework looks at.
You list the property on Airbnb, Stayz or through an agent.
The listing alone does not carry the claim. Bookings, pricing, calendar availability and the quality of the advertising all need to support a genuinely commercial position — and platform statements need to be read as gross income and fees, not net deposits.
The property is shared between family members, co-owners or friends, or one part is rented while another remains private.
Use by any owner or their circle — even unpaid, even brief — can change the commercial character of the arrangement, and each owner's position may not be identical.
Where owners get caught
Common traps
- Repeating last year's rental schedule without reassessing the property under the new framework.
- Assuming some rental income is enough to protect all deductions.
- Relying on a simple day-count when the pattern of private use tells a different story.
- Claiming expenses against net platform deposits without reviewing gross income and platform fees.
- Overlooking family, friend or owner use that changes the commercial character of the property.
What to watch for
- Being listed online does not, on its own, establish that the property was genuinely available on commercial terms.
- Blocking peak rental periods for private use can be a stronger warning sign than the total number of days listed.
- Pricing, booking behaviour and advertising quality all influence how defensible the claim is.
- Interest claims may need separate review where there have been redraws, refinancing or mixed-purpose borrowings.
- Body corporate levies, repairs and capital works warrant careful review rather than treatment as automatic rental deductions.
What to do before you lodge
Affected owners should pause before the 2026/27 return is finalised and test whether their position still reflects the ATO's current approach. That review matters most where the property has private use, inconsistent bookings, high holding costs, body corporate levies, or a borrowing history involving redraws or refinancing.
A short review before lodgement identifies three things: whether the deductions are supportable, whether records are missing, and whether a more cautious position is warranted before the ATO asks the question for you.
How The Quinn Group can help
We can review your holiday home or rental-property position before lodgement, identify the likely risk areas, and work with you to prepare a defensible tax position. We also assist with mixed-use and co-owned properties, Airbnb and Stayz arrangements, body corporate levy treatment, and loan-purpose issues.
If your property is used both personally and to produce rental income, speak with us before finalising your 2026/27 return. An early review is almost always simpler and less costly than responding after a deduction claim has been questioned.
Need Help?
This article provides general information and should not be considered legal or tax advice. For personalised guidance, please contact our expert team of tax accountants at The Quinn Group by calling 1300 QUINNS (1300 784 667) or +61 2 9223 9166, or submit an online enquiry form to arrange an appointment.
