The ATO has updated its guidance on rental property income and expenses from 1 July 2026, including for properties that are also used as holiday homes.

Where a property is a holiday home, it must be used (or held for use) mainly to produce rental income before the owner can claim any expenses relating to its ownership and use.

If this requirement is not met, expenses that are entirely non-deductible may include:

• interest expenses;
• council and water rates;
• body corporate fees; and
• repairs and maintenance.

Where the property is used mainly to produce rental income but there is some minor private use (e.g., a week or a few weekends in the off season when there are no bookings), ownership and use expenses must still be apportioned accurately to reflect the periods of private use.

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