Holiday Homes & The 'Available for Rent' Trap: What the ATO Really Means

If you own a beach house or mountain retreat that you rent out part of the year and use yourself the rest—this one's for you.

You've probably been claiming deductions for mortgage interest, rates, maintenance, and insurance. You list it on Airbnb when you're not using it. You block out school holidays and summer for the family. Seems reasonable, right?

The ATO doesn't think so.

In November 2025, the ATO released three draft documents that signal a major crackdown on holiday home deductions. The rule sounds simple: you can only claim expenses when your property is "genuinely available for rent." But what that phrase actually means just shifted—and a lot of holiday home owners are about to get an expensive surprise.

Here's what's changing, why the ATO cares, and what you need to do before it becomes a problem.

The Rule That Trips Everyone Up

The basic tax law for holiday homes is straightforward enough: you can only claim deductions for expenses to the extent the property is rented out or genuinely available for rent.

This applies to all ownership costs—mortgage interest, council rates, insurance, maintenance, depreciation.

Here's where it gets messy. Most holiday home owners assume "genuinely available for rent" means: "I have it listed on Airbnb when I'm not using it."

The ATO interprets that phrase very differently. And the gap between what you think it means and what they think it means? That's where the tax bill lives.

What "Genuinely Available for Rent" Actually Means

According to the ATO, a property is not genuinely available for rent if:

You advertise in ways that limit exposure — Only using niche platforms, or restricting to certain guest types
You set unreasonably high rents — Pricing above comparable properties to discourage bookings
You block out peak-demand periods — School holidays, long weekends, summer for personal use
You place restrictive conditions — "No children," "minimum 3-month stays," or similar barriers
You reject legitimate booking requests — Taking the property offline when someone wants to book
The property condition makes rental unlikely — Poor state, remote location, accessibility issues

[ATO guidance on rental property genuinely available for rent]

Here's the practical problem: many holiday home owners block out school holidays, Easter, Christmas, and summer—which are exactly when short-term rentals command the highest rates and occupancy. They figure they'll just claim deductions for the off-peak months.

The ATO is now saying: if you're not available during peak season, you're not genuinely available at all. And that could mean losing deductions for the entire year—not just the months you blocked out.

The November 2025 Crackdown: What's Actually Changing

In mid-November 2025, the ATO released draft versions of three new documents:

Taxation Ruling TR 2025/D1
Practical Compliance Guides PCG 2025 D6 & D7

These are open for comment until 30 January 2026.

The key shift: The ATO is moving from asking "is your property available for rent?" to asking "is your property mainly held to produce rental income?"

This distinction matters more than it might seem:

Old Standard	New Standard
Is it available for rent?	Is it mainly for producing income?
You could block peak season and still claim partial deductions	Blocking peak season suggests it's really a personal property
Focus on availability	Focus on purpose

The ATO is treating many holiday homes as "leisure facilities"—properties you use for personal enjoyment that happen to get rented occasionally. And under tax law, leisure facilities can't have ownership expenses deducted unless the property is mainly generating rental income.

In plain English: if the ATO thinks your beach house is really for family holidays with some Airbnb income on the side, you lose the mortgage interest deduction entirely.

What This Actually Costs: A Real Example

Let me show you what this looks like in practice.

Sarah's situation:

Beach house in Byron Bay, purchased for $600,000
$500,000 mortgage at 5.5% = ~$27,500 annual interest
Council rates, insurance, maintenance = ~$8,000
Total deductible expenses claimed: $35,500
Rents on Airbnb 4 months per year (April, May, June, September)
Blocks out school holidays and summer for family (November to March)
Earns ~$20,000 in rental income

Under the old approach: Sarah claimed the full $35,500 in deductions. The property was "available for rent" during the 4 months she advertised it. Seemed fine.

Under the ATO's new focus: The question becomes: Is this property mainly held to produce income?

She blocks out 5 months for personal use
She earns $20,000 against $35,500 in deductions
The property looks like a holiday home she sometimes rents—not an investment

Result: The ATO disallows all $35,500 in deductions. Sarah's tax bill increases by approximately $10,600 (at 30% marginal rate), plus interest and penalties if they audit prior years.

That's not a typo. One reclassification. $10,600 gone.

The Red Flags That Trigger Audits

The ATO has made clear what they're looking for. If you're doing any of these, you're on the radar:

Booking patterns:

Rejecting legitimate booking requests
Blocking out peak seasons (school holidays, Easter, summer)
Sporadic availability vs. consistent listing

Pricing and advertising:

Rents above market rate (to discourage bookings)
Only advertising on one small platform
Conditions that deter guests ("no children," "6-month minimum")

The numbers:

Rental income significantly lower than claimed deductions
Year-on-year losses with no path to profitability
Personal use exceeds rental use

Documentation:

No formal lease agreements
Inconsistent income reporting
Can't produce booking records on request

The ATO specifically notes it will scrutinise "availability during peak holiday periods and actual rental activity, including owners rejecting requests to book the property."

If they ask for your Airbnb calendar and it shows school holidays blocked out every year? That's the conversation you don't want to have.

The Trap Nobody Sees Coming

Here's the logic that gets people into trouble:

"I'll block out school holidays and summer for my family. I'll rent the property the rest of the year. I can still claim deductions for the months it's available."

Sounds reasonable. Here's why the ATO disagrees.

If you're systematically blocking out the most profitable periods—when nightly rates are highest, when occupancy is guaranteed—you're demonstrating that the property is primarily a holiday home. The rental is secondary. An afterthought.

And the tax law doesn't let you deduct ownership costs for properties that are primarily for personal enjoyment.

The consequence: You don't just lose deductions for the blocked months. You potentially lose deductions for all months, because the ATO reclassifies the entire property as a leisure facility.

This is the trap. You think you're being clever by claiming partial deductions. Instead, you're creating an audit trail that costs you everything.

How to Stay on the Right Side

If you own a holiday home, here's what you need to do now—before this becomes a 2026 problem.

1. Be Honest About Your Property's Purpose

Ask yourself: Is this property primarily an investment, or primarily a holiday home?

The honest answer matters:

If you block out more than 2-3 months per year for personal use, the ATO may classify it as a leisure facility
If your rental income is consistently lower than your deductions, the property doesn't look like an investment
If you're rejecting bookings or pricing high to discourage them, you've effectively admitted it's personal

If it's primarily personal: You can still deduct rental-specific expenses (advertising, cleaning between guests, platform commissions). But not ownership costs like mortgage interest, rates, and insurance.

Smaller deduction. But audit-proof.

2. Prove Your Property Is Genuinely Available

If your property is primarily an investment, you need evidence:

Multiple platforms: List on Airbnb, Booking.com, Stayz. More platforms = stronger evidence of genuine availability
Market-rate pricing: Get comparable rates for your area. Price competitively, not to discourage
Minimal blocking: Keep personal-use blocks short. When you do block dates, document why (essential maintenance, not "family Christmas")
Accept bookings: Don't reject legitimate requests to keep dates open for yourself

3. Keep Records Like You Expect an Audit

Because you might get one.

The ATO will want to see:

All booking confirmations
Rental income received (bank statements matching)
All property expenses with invoices
Screenshots of your listings (proving you advertised)
A log of blocked dates with reasons
Correspondence showing you accepted or rejected bookings

Pro tip: Use property management software (Airbnb's built-in reports, Hostaway, Guesty) that automatically generates availability and booking records. If the ATO asks for three years of data, you'll have it in five minutes.

4. Apportion Expenses Correctly

When you do use the property personally, you must apportion expenses:

Type	Treatment
Rental-only expenses (cleaning, advertising, platform fees)	Fully deductible
Ownership costs (mortgage interest, rates, insurance)	Apportioned by rental vs. personal days
Personal-use expenses	Not deductible

Example: If you rent 8 months and use it personally 4 months, claim 2/3 of mortgage interest, rates, and insurance—not the full amount.

The Good News: You Have Time

Here's one thing working in your favour: The ATO has said it won't devote compliance resources to reviewing whether section 26-50 applies to expenses incurred before 1 July 2026, if those expenses relate to arrangements entered before 12 November 2025.

Translation: If you've been claiming holiday home deductions under the old rules, you're safe for the 2025 tax year. From 1 July 2026 onwards, the new standard applies.

This isn't permission to ignore the change. It's a window to:

Restructure your property arrangement if needed
Get your documentation in order
Talk to an accountant about your specific situation

Don't wait until May 2026. The ATO is signalling this is a compliance priority. The draft rulings will almost certainly become final. Get ahead of it now.

The Bottom Line

The "available for rent" trap is real—but it's avoidable.

If your holiday home is genuinely an investment:

Make it available during peak seasons (not just the months you don't want it)
Price at market rates
Advertise widely
Keep meticulous records
Apportion expenses honestly

If your holiday home is primarily for family use, claim only rental-specific expenses. Smaller deduction, but compliant and audit-proof.

The ATO's 2025 crackdown isn't targeting people who play by the rules. It's targeting people who treat holiday homes as personal properties while claiming investment deductions.

If you're blocking out school holidays, Easter, and summer for personal use while claiming full mortgage interest deductions? It's time to have a conversation with your accountant. Before the ATO has that conversation with you.

Key References

Disclaimer: This article is general information and does not constitute financial or tax advice. Property ownership structures, deductibility of expenses, and ATO compliance requirements vary based on individual circumstances. Before making decisions about holiday home deductions, consult with a qualified tax accountant familiar with your specific situation.

Holiday Homes & The 'Available for Rent' Trap: What the ATO Really Means