The ATO is increasing scrutiny on holiday home deductions, especially where the property shows a loss. Choosing the correct portfolio in TaxTank helps ensure:
Accurate apportioning
Only eligible deductions are claimed
You remain compliant with TR 2025/D1 and subsection 26-50
You're protected if the ATO reviews your return
When to Use the Holiday Home Portfolio in TaxTank
Use this portfolio when the property’s primary purpose isn’t genuinely to generate income with a clear profit intention. This applies when the property is used partly, or mostly, for personal enjoyment rather than as a commercial investment.
Examples include:
You, family, or friends use the property for personal holidays (includes rental income less than market value)
The property is listed for short-term rental but also blocked out for private stays
Rental income is occasional, seasonal, or not the main purpose of owning the property
The property is held primarily for lifestyle reasons rather than for generating income
If any of these sound like your situation, the Holiday Home portfolio is the correct choice. TaxTank will automatically apply the correct deduction rules, no manual calculations or guesswork.
When You May Not Need This Portfolio
You may be able to classify the property as a standard investment property if it meets the ATO exception rule:
At all times during the income year, the property was mainly used (or held for use) to produce assessable rental income.
(ATO reference: TR 2025/D1 — paragraph 35)
To determine this, the ATO considers the overall pattern of use, including:
Days genuinely rented vs days used privately
Whether it was available during peak seasons (not blocked for personal use)
Whether friends/family stayed free or at a discount
Whether genuine effort was made to secure bookings
Whether the property is marketed at arm’s-length commercial rates
No single factor determines eligibility as the ATO looks at the whole picture.
If the property clearly operates like a full-time income-producing rental, you may instead use the Share Property portfolio.
Portfolio Quick Guide
Scenario | Correct Portfolio | Deduction Rules |
Primarily for private enjoyment, with occasional rental income | Holiday Home | Limited to eligible deductions with apportioning |
Full-time short term rental, genuine income producing purpose | Share Property | Standard deduction rules apply |
Mixed use but genuinely operated with an income producing purpose | Share Property | Standard deduction rules apply, apportioned for personal use. |
In summary
Select the Holiday Home portfolio if the property has any private or recreational use and is not exclusively held to produce rental income. TaxTank will automate the apportioning and deduction rules to keep you compliant.
If you’re unsure which category applies, we recommend seeking professional tax advice or reviewing the ATO ruling: TR 2025/D1 — Holiday Homes.
Frequently Asked Questions (Q&A's)
1. Is my holiday home now treated as a “leisure facility” under section 26-50?
Q: How does the ATO see my holiday home under the new rules – is it a “leisure facility”?
A: If your property is used (or held) for holidays or recreation, it generally falls within the definition of a “leisure facility” under section 26-50. That means deductions for ownership and use (interest, rates, insurance, etc.) are denied unless an exception applies – for example, where the property is mainly used or held to produce assessable rental income. Australian Taxation Office+1
ATO reference:
Section 26-50 ITAA 1997 – Expenses for a leisure facility
PCG 2025/D7 & TR 2025/D1 (holiday homes and rental property deductions)
2. Can I claim interest, rates and insurance if my holiday home is mostly for private use but sometimes rented on Airbnb?
Q: My place is mainly for us, but we rent it occasionally. Can I still claim the holding costs?
A: Under TR 2025/D1 and section 26-50, if the property is mainly a private/leisure asset with only occasional rental, many holding costs (interest, rates, insurance, etc.) may not be deductible. You may still be able to claim expenses directly tied to genuine rental activity (such as advertising or agent fees) for the period the property is actually rented or genuinely available for rent, but not the full-year holding costs. Australian Taxation Office+1
ATO reference:
TR 2025/D1 – Holiday homes and rental property income/deductions
Rental properties 2025 – mixed private/rental use
3. How does the ATO decide if my property is “mainly used to produce assessable income”?
Q: What does “mainly used (or held for use) to produce assessable rental income” actually mean?
A: The ATO looks at the overall pattern of use over the year, not just your stated intention. Key factors include:
Days rented vs days used privately
Whether the property was genuinely available for rent (advertised properly, realistic market rates)
Whether bookings were refused or blocked for private use
Whether it’s run in a commercial, arms-length way
If, taken as a whole, the property is mainly income-producing, it may fall under the exception and avoid the full section 26-50 denial. Australian Taxation Office+1
ATO reference:
TR 2025/D1 – exception where property is mainly income-producing
“Rental property – genuinely available for rent” guidance
4. Do I need to reduce deductions for periods blocked out for my own holidays?
Q: If I block peak periods for my own use but rent the property the rest of the year, what happens to my deductions?
A: Periods where the property is blocked for private use are private, not “genuinely available for rent”. You cannot claim deductions for those private periods. Deductions must be apportioned, so only the share of expenses relating to actual rental or genuine availability for rent is deductible. Australian Taxation Office+1
ATO reference:
Holiday homes – private vs rental use
Rental expenses – only for periods rented or genuinely available for rent
5. Are discounted or free stays for family and friends treated as private use?
Q: If I let family or friends stay at a discount (or for free), is that still “rental use”?
A: The ATO generally treats free or mates-rates stays for family and friends as private or non-commercial use. These periods are usually treated the same as owner-private use, so you can’t claim full rental deductions for them and must apportion your expenses accordingly. Australian Taxation Office+1
ATO reference:
Holiday homes – non-commercial and family use
Rental properties guide – below-market and private use examples
6. Can I claim expenses when the property is empty?
Q: If the property is vacant, can I still claim interest and other expenses?
A: Yes, but only if during that period the property is genuinely available for rent – for example, it’s properly advertised, at market rates, and you’re not placing unreasonable restrictions on tenants. If the property is simply kept for your own use or not offered for rent in a genuine way, deductions are not available for that time. Australian Taxation Office+1
ATO reference:
Rental property – genuinely available for rent
Holiday homes – rented vs not rented
7. What records do I need to keep for a holiday home?
Q: What documentation does the ATO expect if I’m claiming deductions on a holiday home?
A: You should keep records for at least 5 years showing:
Dates and details of rental bookings
Days the property was available for rent vs private use
Advertising (listings, platforms, dates, pricing)
Expenses (interest, rates, insurance, repairs, cleaning, agent fees, etc.)
Any private, family or friends’ stays
These records support your apportionment and show whether the property was genuinely available for rent. Australian Taxation Office
ATO reference:
“Records for rental properties and holiday homes”
8. What’s the tax difference between a “holiday home not rented” and “holiday home with some rental”?
Q: How does the ATO treat a holiday home I never rent versus one I rent a bit?
A:
Not rented at all: You generally don’t include anything in your tax return until you sell – no rental income and no deductions for holding costs.
Partly rented: You must declare all rental income and can only claim deductions for periods when it was rented or genuinely available for rent, subject to the new holiday home rules and section 26-50 limitations. Australian Taxation Office+1
ATO reference:
Holiday homes – not rented vs rented
Residential rental properties – income and deductions
9. Can I reclassify my property from “Holiday Home” to “Share Property” later?
Q: If I turn my holiday home into a genuine full-time rental later, can I change how I classify it?
A: Yes. Classification is year-by-year and based on actual use. If in a later income year the property is mainly used or held to produce assessable income, with only minor private use, you may be able to treat it as a standard rental (for example, TaxTank’s Share Property portfolio) and move out of the strict holiday home/section 26-50 treatment. Australian Taxation Office+1
ATO reference:
TR 2025/D1 – annual assessment of use and purpose
Rental properties 2025 – mixed use examples
10. How does TaxTank’s Holiday Home portfolio help with section 26-50?
Q: What’s the benefit of using the Holiday Home portfolio in light of section 26-50 and TR 2025/D1?
A: Section 26-50 and the ATO’s draft guidance aim to deny or limit deductions for properties used as leisure or holiday assets unless strict conditions are met.
TaxTank’s Holiday Home portfolio is designed to:
Recognise the property as a potential “leisure facility”
Automatically restrict and apportion deductions in line with ATO rules
Distinguish between private, non-commercial, and genuine rental use
Help you stay aligned with TR 2025/D1 and the ATO’s compliance approach under PCG 2025/D7
In short, it reduces the risk of over-claiming and supports your position if the ATO reviews your return. Australian Taxation Office+2Australian Taxation Office+2
ATO reference:
TR 2025/D1 – draft ruling on rental property income and deductions
PCG 2025/D7 – section 26-50 compliance approach
Section 26-50 ITAA 1997 – leisure facilities