If you own an investment property, holiday home or short-term rental, there’s an important update from the Australian Taxation Office (ATO) that could affect your tax return.
The ATO has recently finalised new guidance designed to provide greater clarity around rental property income, deductions and record keeping. While many of the principles aren’t new, the guidance reinforces that property owners need to ensure their claims accurately reflect how their property is actually being used.
The Key Takeaway
The ATO is placing greater emphasis on ensuring rental property deductions genuinely relate to income-producing activities.
This is particularly relevant for owners of:
- Investment properties
- Holiday homes
- Airbnb and short-term accommodation
- Properties occasionally used by family or friends
Simply making a property “available for rent” may not automatically entitle owners to claim the full range of deductions if the property is also being used privately.
Holiday Homes Face Greater Scrutiny
One of the biggest changes affects holiday homes.
Under the ATO’s updated guidance, if a holiday home is primarily used for personal holidays or recreation—even if it is rented out during parts of the year—it may be considered a “leisure facility”. In some circumstances, this means owners may no longer be able to claim deductions for ongoing ownership costs such as:
- Mortgage interest
- Council and water rates
- Insurance
- Land tax
- Repairs and maintenance
- Depreciation
Direct costs associated with earning rental income, such as booking platform fees, advertising and guest cleaning, may still be deductible.
Genuine Rental Activity Matters
The ATO will look beyond whether a property appears on Airbnb or Stayz.
They’ll consider factors such as:
- Is the property genuinely available for rent?
- Are you blocking out peak periods for personal use?
- Are family or friends staying at discounted rates?
- Is the property being marketed at commercial market rates?
- Are there unreasonable restrictions preventing bookings?
The focus is on how the property is actually used—not simply how it’s advertised.
Record Keeping Is More Important Than Ever
Good record keeping has always been essential, but the updated guidance reinforces its importance.
Property owners should keep records of:
- Rental income received
- Advertising history
- Booking calendars
- Maintenance and repair invoices
- Interest statements
- Insurance and council rates
- Periods of private use
Having clear documentation makes it much easier to support any deductions claimed if the ATO requests further information.
What Does This Mean for Long-Term Investors?
For owners of traditional long-term investment properties that are genuinely rented to tenants on commercial terms, very little changes.
The guidance is largely about clarifying existing tax principles and helping taxpayers correctly apply them.
However, if your circumstances have changed—for example you’ve started offering your property as short-term accommodation or occasionally using it yourself—it may be worth reviewing your position with your accountant before lodging your next tax return.
The Bottom Line
Owning an investment property remains a great long-term wealth strategy, but staying compliant with tax obligations is becoming increasingly important.
If you’re unsure whether your rental property arrangements meet the ATO’s expectations, now is a good time to seek professional tax advice and review your record keeping.
At Scenic Property, we’re passionate about helping Mornington Peninsula property owners maximise the performance of their investment. While we don’t provide tax advice, we work closely with local investors and can help ensure your property is professionally managed, genuinely income-producing, and positioned for long-term success.
If you’d like to discuss long-term leasing, property management or the local rental market, get in touch with the Scenic Property team today.
