I rent out my holiday home sometimes — can I still claim the interest and rates?

You own an apartment on the Gold Coast, or a cottage on the Central Coast. When the family isn't using it, you list it on Airbnb or Stayz, and at tax time you claim the interest on the loan, the council and water rates, the body corporate fees — the way any rental property owner would. For years, that was broadly how it worked. From the 2026–27 year, the ATO looks at it differently.

The question the ATO now asks first

In May 2026 the ATO finalised a new ruling, TR 2026/1, on deductions for rental properties, backed by two practical compliance guidelines — PCG 2026/2, on how to apportion deductions, and PCG 2026/3, on holiday homes specifically. The ruling doesn't invent a new tax. It sharpens one question, and applies it before any of your ownership costs are deductible: is the property used primarily to produce assessable income?

The word doing the work is 'primarily.' A property genuinely on the rental market — advertised at a realistic rate, available to strangers, actually earning income — passes. A property that is really a private holiday home, listed occasionally around the family's own use, does not. Renting it out now and then is no longer enough on its own.

What stops being deductible if you fail the test

If a property isn't used primarily to earn income, the ownership and use costs stop being deductible. That is the expensive list: interest on the loan, council and water rates, body corporate fees, capital works, and decline in value (depreciation). For a geared holiday property those are close to the entire deduction — losing them can turn a paper tax loss into no deduction at all.

A short list of costs stays deductible even then, but only the ones tied directly to a guest actually staying: advertising and listing fees, cleaning after a guest stay, and the booking commissions the platform takes. Everything that flows from simply owning the place is gone.

The middle ground: apportionment

Most holiday homes aren't all-or-nothing, and the rules aren't either. If your property is mainly rented out but you keep a small window of private use — a week in the off-season, a couple of weekends when a booking was never realistic — you can still deduct, but only for the income-producing portion. PCG 2026/2 sets out a time-based method: you apportion the year's costs across the days the property was genuinely available for and used to produce income, and you don't claim for the days it was yours.

The misconception that gets people pulled

The trap is treating 'it's listed' as if it settles the question. A property advertised at a rate no real guest would pay, blocked out across every school holiday and long weekend, or 'available' only when the family happens not to want it, reads to the ATO as private use dressed up as a rental. The income it can see through platform data-matching rarely matches the deductions claimed against it, and that mismatch is what gets pulled for review.

The ATO has said it will not review holiday-home rental expenses incurred before 1 July 2026, so the practical effect starts with the year you are in now. If you own a property that mixes rental and personal use, this is the year to look honestly at how it is really used — before you claim, not after a review.

This is general information current as at July 2026, not advice for your situation; how the rules apply depends on how your property is actually used and held. If you have a holiday home, a mixed-use investment property, or you're not sure which side of 'primarily' yours falls on, that is exactly the question worth working through with a registered agent. That is what our tax service for property investors is for.