26 Mar Airbnb Tax Australia 2026: ATO Rules, Deductions & What You Must Declare
Where income production is prioritised over personal use of the property
The ATO considers income from Airbnb rentals as assessable income that you must declare on your tax return. This applies whether you’re renting out a spare room or an entire property.
You must report all income earned from Airbnb rentals on your annual tax return, regardless of the amount. This includes:
• Rental payments from guests
• Cleaning fees
• Any other fees charged to guests
When it comes to claiming Airbnb tax deductions in Australia, you need to consider how you are using the property and how much of it you rent out.
If you are not renting a standalone property, then you’ll need to calculate the percentage of the property you use for your private needs versus the portion you rent out. Also, if you do rent out an entire property but sometimes use it privately, then you’ll need to apportion your expenses accordingly. For example:
• If you rent out one room of a three-bedroom house, you might claim 1/3 of shared expenses like utilities and internet.
• If you rent out your entire property for 180 days of the year, you can claim 180/365 (about 49%) of annual expenses like mortgage interest and council rates.
At every step of the way, you should keep detailed records of both income and expenses. This includes:
• All income received from Airbnb rentals
• Costs related to your Airbnb activities
• Dates the property was available for rent
• Periods of personal use vs. rental use
The ATO requires you to keep these records for at least five years.
As an Airbnb host, you can claim a variety of tax deductions related to your rental activities. This is in addition to any other tax benefits for which you are eligible.
Direct Expenses
Direct expenses are costs you specifically incur for your Airbnb rental. These are fully deductible and include:
• Cleaning fees
• Guest amenities (toiletries, tea, coffee, etc.)
• Advertising costs
• Airbnb service fees
• Welcome gifts for guests
• Professional photography for listings
Indirect Expenses
Indirect expenses are costs associated with owning and maintaining the property. If you rent out your entire property, these are fully deductible. For partial rentals, you’ll need to apportion these expenses. Examples include:
• Utility bills (electricity, water, gas, internet)
• Mortgage interest
• Council rates
• Property insurance
• Repairs and maintenance
Depreciation
Depreciation allows you to claim the decline in value of furniture, appliances, and fittings used for your Airbnb rental. This includes items like:
• Beds and mattresses
• Sofas and chairs
• TVs and entertainment systems
• Domestic appliances (refrigerator, washing machine, etc.)
• Air conditioning units
Capital Works Deductions
Capital works deductions are related to the construction costs of buildings or structural improvements. These can be claimed at 2.5% per year for 40 years from the date of construction. Examples include:
• Building a new room or extension
• Adding a deck or patio
• Installing built-in wardrobes or kitchen cabinets
Professional Services
You can also claim fees paid for professional services related to your Airbnb. These may include:
• Accountant fees
• Property management fees
• Legal advice costs
These indirect expenses are generally fully deductible if the property is used exclusively for Airbnb rentals. However, if Sarah uses the property for personal purposes at any time during the year, she would need to apportion these expenses based on the number of days the property was available for rent versus personal use. Again, Sarah needs to keep detailed records and receipts for all these expenses to support her claims at tax time.
What cannot be claimed as tax deductions?
While there are many Airbnb costs you can claim at tax time, there are several types of expenses you should not include. These are:
• Expenses related to personal use of the property
• Costs of purchasing the property (e.g., stamp duty, legal fees for property acquisition)
• Capital gains tax when selling the property
• Expenses which guests have reimbursed
Apportioning expenses: Personal vs. business use
If you use your property for both personal and Airbnb purposes, you’ll need to apportion your expenses accordingly. The ATO recommends using a reasonable method to calculate the deductible portion based on your private versus rental use.
For example, if you rent out a room in your home, you might calculate the percentage of floor space used for Airbnb and apply that to shared expenses like utilities and Internet. For time-based apportionment, you could use the number of days the property was available for rent compared to the total days in the year.
Example: not available for rent for part of the year
Bindi and Ash own a holiday home in a regional town close to several bushwalking tracks. The most popular times for tourists to visit the town is over the warmer summer months up until the end of the Easter school holidays. The local council has rules for short-term rental properties: they must be registered and can only be rented out for up to 180 days per year.
To keep within the 180-day limit, Bindi and Ash stop renting out their property from late April to late October each year. During this time, they either use the property themselves or allow family and friends to use it.
From 1 November to 28 April (179 days), Bindi and Ash receive $18,500 from renting their holiday home. Their expenses for the income year total $32,250. This amount includes agent’s commission and advertising costs of $2,535.
The property isn’t rented or genuinely available for rent during the period from 29 April to 31 October (186 days). Bindi and Ash can’t claim a deduction for expenses incurred during this period. However, they can claim deductions for:
• expenses during the 179 days the property is rented or genuinely available for rent
• the full $2,535 for agent’s commission and advertising as it relates solely to the rental period.
Bindi and Ash calculate their deduction for the property as:
• ((179 days ÷ 365 days) × $29,715) + $2,535 = $17,108
The net rental income from the property is $1,392 ($18,500 − $17,108). Bindi and Ash jointly own the property so they each declare net rental income of $696 in their tax returns.
Example: holiday home genuinely available for rent with minor private use
Gail and Craig jointly own a holiday home which they rent out at market rates to holiday-makers. They hire a property manager through a local real estate agent to advertise and oversee the property. After considering a long-term lease; they decide short-term rentals are more profitable.
The property is available for rent year-round, including peak periods such as weekends, school holidays, Easter and Christmas. Gail and Craig use the property themselves for 4 weeks during the year, in ‘off-peak’ periods when they’re unlikely to find tenants.
During the year, their property expenses are $36,629. This includes $1,828 for agent’s commission and the costs of advertising for tenants. It also includes interest on the funds borrowed to purchase the holiday home, property insurance, maintenance costs, council rates, the decline in value of depreciating assets and capital works deductions.
Gail and Craig receive $25,650 from renting out the property during the year. They can claim a deduction for the full amount of $1,828 for agent’s commission and advertising costs. The remaining $34,801 must be apportioned for the time the property is rented out or is genuinely available for rent. They can’t claim any deductions for the 4 weeks they use the property themselves.
Gail and Craig’s rental income and deductions for the year are as follows:
• rent received = $25,650
• rental expenses ((48 ÷ 52) × $34,801) + $1,828) = $33,952
• rental loss is $25,650 − $33,952 = ($8,302).
As they are joint owners, Gail and Craig claim a rental loss of $4,151 each in their tax returns.
Example: rented out for part of the year at market rates
Marie owns a holiday home in a seaside town. Her family uses the property during the December to January school holidays and Easter break each year. The rest of the year, she rents it out using an accommodation sharing platform to help cover her property expenses.
On the platform, Marie marks school holidays and Easter as ‘blocked’ for her family’s use. These are also the town’s busiest times for tourists, especially the December–January summer holidays.
Marie personally uses the property for 20 days in December–January and another 20 days during other school holidays and Easter. She rents it out to other holiday-makers for 25 days during quieter periods outside of school holidays and Easter.
Marie receives $3,000 in rental income for the year. Her expenses total $60,000 which includes $450 in platform commission for the rented days.
Marie can’t claim any deductions for:
• the time she uses the property herself
• the period the property is not in use.
Marie can claim deductions for the period the property is actually rented (25 days). Marie would calculate her deductions as:
• rent received = $3,000
• rental expenses ([25 ÷ 365] × $59,550) + $450 = $4,529
• net rental loss = $3,000 − $4,529 = ($1,529).
Marie can claim a net rental loss of $1,529 in her tax return.
Example: private use by owner and rented to friends at a discount
Kelly and Dean jointly own a holiday home. During holiday periods, the market rent is $840 per week. They hire a real estate agent to advertise and manage the property.
Kelly and Dean arrange with the agent to have the property blocked out for 7 weeks during the income year. They use it for 4 of those weeks and their friend Kimarny stays at the property for the other 3 weeks at a reduced rent of $200 per week.
The total rent Kelly and Dean receive for the income year, including Kimarny’s rent, is $34,200.
Kelly and Dean’s expenses for the property are $41,499 for the income year. This includes agent commission and advertising of $1,499. The remaining expenses of $40,000 include interest on the funds borrowed to purchase the holiday home, property insurance, maintenance costs, council rates, the decline in value of depreciating assets and capital works deductions.
Kelly and Dean can’t claim any deductions for the 4 weeks they use the property themselves. They can claim a deduction for their expenses based on the proportion of the income year the property is rented out or is genuinely available for rent at market rates:
(45 ÷ 52 weeks) × $40,000 = $34,615
They can claim the full $1,499 for agent’s commission and advertising.
For the 3 weeks Kimarny rented the property at a reduced rate, they can only claim deductions equal to the rent they received ($600). This is because Kimarny paid less than the market rate and their expenses are more than the rent for the period:
([3 ÷ 52] × $40,000 = $2,308)
Kelly and Dean’s rental income and deductions for the year are as follows:
• rent received = $34,200
• rental expenses $34,615 + $1,499 + $600 = $36,714
• net rental loss $34,200 − $36,714 = ($2,514)
As they are joint owners, Kelly and Dean declare net rental loss of $1,257 each in their tax returns.
Example: private use and expenses less than discounted rent received
Shahani and Marvin jointly own a holiday home. They advertise it for rent at market rates of up to $1,040 per week. They hire a real estate agent to advertise and manage the property.
During the year:
• their friends, Katrina and Greg, stay at the property for one week at a reduced rent of $600
• a cousin, Gerard, stays for another week for $600
• Shahani and Marvin also use the property for 4 weeks.
Shahani and Marvin’s expenses for the property total $30,939. This includes agent commission and advertising of $1,755. It also includes interest on the funds borrowed to purchase the holiday home, property insurance, maintenance costs, council rates, the decline in value of depreciating assets and capital works deductions.
Shahani and Marvin receive $46,960 in rent for the year. This includes the $1,200 they receive from Katrina, Greg and Gerard.
Shahani and Marvin can’t claim a deduction for the 4 weeks they use the property themselves. They can claim a deduction for their expenses based on the proportion of the income year the property is rented out or is genuinely available for rent at market rates:
(46 ÷ 52 weeks) × $29,184 + $1,755 = $27,572
Shahani and Marvin can still claim deductions for the 2 weeks Katrina, Greg and Gerard rented their property. This is because the rent received ($1,200) is more than their expenses of $1,122 for that period ([2 ÷ 52] × $29,184).
Shahani and Marvin’s rental income and deductions for the year are as follows:
• rent received = $46,960
• rental expenses $27,572 + $1,122 = $28,694
• net rental income $46,960 − $28,694 = $18,266.
As they are joint owners, Shahani and Marvin declare net rental income of $9,133 each in their tax returns.
Shahani and Marvin need to keep records of their expenses. If they sell the property and make a capital gain, the expenses that relate to their personal use are considered when working out their capital gain. These are the expenses they couldn’t claim a deduction for, such as interest, insurance, maintenance costs and council rates because it related to their own occupation of the property.
Where personal use of a property is prioritised over income production
Where personal use of a property is prioritised over income production, particularly during peak holiday periods, the property will be considered a ‘leisure facility’, a characterisation that results in the denial of any tax deductions for costs such as interest, council rates and land tax. Simply putting in place an annual rental agreement may not overcome the specific anti-avoidance rule contained in this provision. The ATO will begin applying this view from 12 November 2025, with a transitional start date of 1 July 2026 for pre-existing arrangements.
What are the changes to the ATO’s approach to holiday homes?
The ATO is relying on a provision for ‘leisure facilities’, that has largely been ignored to date, to deny deductions for holiday homes that are only partly used to produce income. For those that may have a holiday home that they rent out for part of the year but also use for their own enjoyment (e.g. over Christmas and Easter periods), the ATO has said it will apply section 26-50 of the Income Tax Assessment Act 1997.
That section disallows deductions for losses or outgoings, including mortgage interest, council rates, land tax, and maintenance to the extent they relate to the ownership or use of a leisure facility. Tax depreciation is also not deductible in respect of the depreciating assets that are part of a leisure facility. Expenditure that is denied may however form part of the cost base of the asset for CGT purposes.
What is a leisure facility?
Section 26-50 defines a leisure facility as land, a building, or part of a building or structure used (or held for use) for holidays or recreation. In Taxation Ruling TR 2025/D1 (“the Draft Ruling”) the ATO states that a holiday home may be considered a leisure facility if it is mainly used for holidays or recreation. This could include a typical beach house but may also be an apartment in the CBD of a capital city if the owners visit and stay there during their holidays. In particular, the ATO considers that a rental property will constitute a leisure facility where the private use of the property is prioritised over income generation. The draft ruling emphasises that occasional rental activity will not be sufficient to change this conclusion if the overall use of the property reflects a predominant personal or recreational purpose.
This view would appear to extend to most holiday homes, even if they are only occasionally used for private purposes. An example in the ruling involves a house near the beach that the owners stay in during the Christmas and New Year period and other school holidays. Even though the owners only stay in the property for about a month each year, and otherwise advertise it through sharing platforms, the ATO indicates that it would consider it to be a leisure facility such that no portion of rental expenses are allowable as deductions, other than those specifically incurred to generate rental income such as advertising fees and commissions paid to the platform and fees for cleaning the property for guest stays.
Draft Practical Compliance Guideline PCG 2025/D7 was issued alongside the Draft Ruling, setting out the ATO’s proposed compliance approach in determining whether or not a rental property is a leisure facility, introducing a risk-based framework (i.e. green, amber and red zones).
• Green (low risk): High level of usage of a property to produce income combined with limited non-income producing use. That is, the property is mostly rented, with minimal private use.
• Amber (medium risk): Increased personal use of the property by the individual, family and friends, forgoing income generation to make the property available for private use and/or available for private use during peak times.
• Red (high risk): Little or no commercial exploitation of the property to produce income though income producing activities and the non-income producing use is usually prioritised. That is, property is primarily for personal use, with limited or token rental activity.
Are there any exceptions to the rules for leisure facilities?
A portion of expenses may still be deducted, if at all times during the income year the property is used or held for use mainly to produce assessable income. This is to be determined based on a consideration of several factors include the way the property is used and the time it is dedicated to income-producing uses as opposed to potential private use including during peak seasonal demand periods.
A part-year exception is also available to allow part of the rental expenses as deductions but only where there has been a clear change of the main use of the property part way through the year. This does not apply where there is seasonal private use of the property during a particular year but rather requires a permanent change to the way in which the property is used or held.
