6 August 2026
Chartered Accountants Australia and New Zealand (CA ANZ) is urging holiday homeowners to understand a significant change in how the ATO applies existing tax law to second homes, affecting what expenses can be claimed from the current financial year.
The Australian Taxation Office (ATO) has finalised guidance applying a long-standing provision, the "leisure facility" rule, more strictly to holiday homes.
Under these rules, a holiday home that is not held mainly to produce income may be treated as a leisure facility, denying most ownership deductions.
Where a property is classified as a leisure facility, mortgage interest, council rates, land tax and maintenance are denied in full, with no apportionment for periods the property was available for rent.
Only expenses directly related to earning rental income, such as advertising, cleaning after guest stays and booking commissions, remain deductible.
“This is a major shift,” CA ANZ Tax Leader, Susan Franks said. “If your holiday home is primarily for personal enjoyment, you may no longer be able to claim key expenses, even if you rent it out occasionally.”
How the ATO will assess usage
The ATO will no longer rely on the "days available for rent" method alone. Instead, it will assess whether the property is held mainly to produce income, weighing a wider range of factors.
Deductions are more likely to be denied where:
- Availability is restricted or blocked during peak periods
- Owner-imposed booking conditions limit genuine rental opportunities
- Family and friends are charged below-market rates
"Beach houses, ski lodges and similar properties in popular seasonal destinations will face closer scrutiny if they are not genuinely available when demand is highest," Ms Franks said.
Transitional compliance window
The ATO has said it will generally not review expenses incurred before 1 July 2026, but only where the arrangement was in place before 12 November 2025. The transitional approach does not protect arrangements involving avoidance, fraud or evasion.
However, Ms Franks cautioned that this is not a long-term exemption. "This is a window, not a free pass. Taxpayers should use this time to understand how the rules apply to them going forward," she said.
Advice critical as scrutiny tightens
CA ANZ is encouraging holiday homeowners to check how the guidance applies to their circumstances.
"Holiday homeowners need to look closely at these changes, so they are not caught out by the ATO," Ms Franks said.
“To maintain eligibility for deductions, owners will need to demonstrate that their properties are genuinely available for rent, especially during peak periods, offered at commercial market rates, and free from unnecessary restrictions that deter guests.”
"To keep their deductions, owners need to show the property is genuinely available for rent, especially in peak periods, offered at market rates, and free of restrictions that deter guests," Ms Franks said.
She stressed the importance of good record-keeping and professional advice.
"Keep detailed records and talk to your Chartered Accountant about how these changes affect you," Ms Franks said.
ENDS
About Chartered Accountants Australia and New Zealand
Chartered Accountants Australia and New Zealand represents more than 140,000 financial professionals, supporting them to make a difference to the businesses, organisations and communities in which they work and live. Chartered Accountants are known as Difference Makers. The depth and breadth of their expertise helps them to see the big picture and chart the best course of action.
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For more information contact:
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Zoe Delamare, Public Affairs Lead M +61 431 601 002
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Owen Roberts, Public Affairs Specialist Australia M +61 422 644 847 owen.roberts@charteredaccountantsanz.com
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