Is your Airbnb a "holiday home"? ATO ruling TR 2026/1 explained

1. What changed

On 20 May 2026 the ATO finalised Taxation Ruling TR 2026/1, rental property income and deductions for individuals who are not in business, along with two Practical Compliance Guidelines:

• PCG 2026/2 on apportioning rental property deductions, and
• PCG 2026/3 on how section 26-50 (the "leisure facility" rule) applies to holiday homes you also rent out.

The ruling replaces IT 2167, the ATO's rental property ruling since 1985. It covers long-term leases and the short-term market, including whole homes, holiday homes and rooms on Airbnb, Stayz and similar platforms.

The big shift is on holiday homes. For the first time in a final ruling, the ATO's view is that section 26-50 denies ownership-type deductions for holiday homes that owners also rent out, unless an exception applies. The main exception is when the property is used or held mainly to earn rent.

2. When it applies

The ATO said it would not devote compliance resources to whether section 26-50 applies to expenses incurred before 1 July 2026. From 1 July 2026 it is reviewing these claims, so the 2026–27 income year is the first full year without that transitional concession.

3. What counts as a "holiday home"

The ruling treats a holiday home as a type of leisure facility: a property used, or held for use, for your holidays or recreation, or for family or friends who stay free or at a reduced rate. A property doesn't stop being a holiday home just because it sits empty. If you are keeping it free for your own use, it can still count.

4. What deductions are at risk

If the property is a holiday home and no exception applies, ownership costs can be denied in full, including:

• loan interest
• council and water rates
• insurance
• body corporate or strata levies
• capital works and depreciation

That is a bigger hit than before. Under the old approach, owners usually apportioned these costs and claimed the share for the time the property was genuinely available for rent. On a geared holiday home this can mean thousands of dollars a year in lost deductions. The rental income is still taxable.

5. The test: is it used mainly to earn rent?

The ATO weighs the numbers (nights booked, nights available, nights used privately) and the circumstances, to decide objectively what the property is mainly used for.

Signs the ATO may see a holiday home	Signs of a genuine rental
Blocking Christmas, Easter or school holidays for yourself	Available all year, including peak periods
Prices set well above market, so few bookings come in	Market pricing, adjusted with demand
Turning down most booking requests, or strict conditions that put guests off	Reasonable house rules, instant booking
Listed on one site with little exposure	Advertised widely across several platforms
Family and friends stay free or at a discount	Family pay market rates, or stays are recorded as private use
Long stretches empty but kept free for your own use	High occupancy and limited private use, mostly off-peak

In one of the ruling's examples, a couple list their beach house on sharing platforms but block out school holidays for themselves. The ATO treats it as a holiday home. Accounting bodies have warned owners to keep the property genuinely available for rent in peak seasons and to set a fair market rent.

6. Who is mostly not affected

• Long-term rentals that you, your family and your friends don't use.
• Investment short-stay properties you don't use yourself, such as an inner-city apartment let all year. Commentators note the changes don't target short-stay properties run commercially for occupancy.
• Mid-term and corporate rentals let on commercial terms.
• Properties held through a genuine rental business. The ruling is for individuals who are not in business, so get advice if your structure is different.

Normal apportionment still applies whenever you use a property privately. You can't claim for the nights you or your family use it, and if family or friends pay below-market rent, deductions are generally limited to the rent they pay.

7. Why records and management matter more now

The ATO will look at evidence. Owners who can show year-round availability, market pricing, wide advertising and high occupancy are in a far stronger position. A professional manager produces most of that evidence automatically: dynamic pricing history, listings on several platforms, booking calendars, owner-stay records and monthly statements.

If you want regular holidays in your own property, plan them for quieter periods and record them. If the property is mainly for your family, accept that it may be treated as a holiday home and get advice on what that means for you.

What to do now

1. Decide what the property is: a holiday home you sometimes rent out, or an investment you sometimes use. The ATO looks at what you actually do, not what you call it.
2. Keep peak periods open to guests (Christmas, New Year, Easter, school holidays, long weekends) if you want to claim ownership costs.
3. Price at market and keep evidence of how prices were set.
4. Advertise widely and accept reasonable bookings.
5. Record every private night, including family and friends, and whether they paid market rent.
6. Keep your calendar, listings, pricing history and statements for at least five years.
7. Talk to your accountant before the 2026–27 return, the first full year without the transitional concession.

Common questions

What is ATO ruling TR 2026/1?

TR 2026/1 is the ATO's taxation ruling on rental property income and deductions for individuals who are not in business. It was finalised on 20 May 2026, replaces the 1985 ruling IT 2167, and comes with PCG 2026/2 on apportionment and PCG 2026/3 on holiday homes you also rent out.

Can I still claim deductions on my Airbnb holiday home?

It depends on whether the property is used or held mainly to earn rent. If it is really a holiday home, the ATO's view is that ownership costs such as interest, rates, insurance, strata and depreciation can be denied. Costs are still apportioned for private use where that rule doesn't apply. Get advice for your situation.

When does the new holiday home rule start?

The ATO will not devote compliance resources to whether section 26-50 applies to expenses incurred before 1 July 2026. From 1 July 2026 it is reviewing these claims, so 2026–27 is the first full year affected.

Does TR 2026/1 affect investment properties I never use?

Generally not in the same way. A long-term rental, or a short-stay property you, your family and your friends don't use, is not a holiday home under the ruling. Normal deduction and record-keeping rules still apply.

What makes a property "genuinely available" for rent?

The ATO looks at whether it is advertised so it reaches potential guests, priced at market rates, available in peak periods, and offered on reasonable conditions. Blocking peak seasons for yourself, overpricing or rejecting bookings point the other way.

Related: Airbnb vs long-term rent · Rate rises: STR vs MTR vs LTR · What management costs. Based on TR 2026/1, PCG 2026/2 and PCG 2026/3 and published commentary. This page is general information, not tax advice. Speak to a registered tax agent about your own circumstances.

Last checked: 9 November 2026. This page is general information, not legal or tax advice. Rules change, so confirm the details for your own property with the council, your body corporate or strata manager, and your accountant.