The new ruling, along with two practical compliance guidelines, covers:

• When income from a rental property is assessable
• When expenses can be claimed as deductions
• How to apportion deductions across income-producing and non-income-producing periods
• When deductions for a holiday home will be denied

The guidance applies to both short-term rentals (booked via online platforms, including renting a room or an entire property) and traditional long-term rentals. A holiday home, in this context, is a property used or held for use by the owner, their family or friends for holidays or recreation.

What this means for you:

• To claim deductions on a property that also serves as a holiday home, it must be mainly used to earn assessable income.
• If it isn’t, deductions for ownership and use expenses — interest, council and water rates, body corporate fees, capital works and decline in value — won’t be available. Only costs like advertising, post-stay cleaning, and booking fees and commissions will remain deductible.
• If the property is mainly used to produce income but has some private use (for example, a few weeks in the off-season with no bookings or low likelihood of bookings), deductions can still be claimed — but expenses must be apportioned, excluding the private-use period.

For full details and worked examples, see the ATO ruling.

If you have a rental property, especially one that’s also used personally, get in touch with our team to make sure your deductions are structured correctly under the new guidance.