Holiday homes and short-stay rentals: the tax rules
A holiday house on the coast or in the mountains, rented out when the family isn’t using it, is a popular way to help cover the costs. It’s also one of the areas the ATO reviews most closely, because the line between private use and rental is easy to blur.
Rental income is taxable
All rent, whether from a property manager, Airbnb, Stayz or friends, must be declared. The ATO collects data from short-term rental platforms and matches it to tax returns.
You can only claim for rental periods
Expenses can be claimed only for the periods the property was rented, or genuinely available for rent. Costs for the rest of the year are private.
Typical expenses that need to be apportioned include interest, rates, land tax, insurance, strata levies, electricity, internet, cleaning, repairs and depreciation. Costs that relate only to renting, such as agent or platform fees and cleaning between guests, are fully deductible.
A simple example
The Nguyens’ holiday house was rented for 120 nights, available but empty for 60 nights, and used by the family for the remaining 185 nights. They can claim roughly 180/365 of the shared annual costs, plus 100% of rental-only costs like platform fees.
“Genuinely available” means available to the public
The ATO looks closely at whether a property was really available for rent. Warning signs include:
- advertising only in ways that limit exposure, such as word of mouth or a single little-known site,
- rent set well above market so it’s unlikely to be booked,
- unreasonable conditions, like no children, no pets and references for a weekend stay,
- refusing bookings without a good reason, and
- blocking out school holidays and other peak periods for family use, leaving only quiet periods available.
If these apply, periods that look “available” may be treated as private.
Family, friends and mates’ rates
If family or friends stay for free, or at less than market rent, those periods are private. You don’t declare the discounted rent, but you can only claim expenses up to the amount of rent received for that period, not the full costs.
Interest when the house is partly private
If you borrowed to buy the property, the interest must be apportioned on the same basis as other costs. Only the rental share is deductible.
Renting out part of your own home
Renting a room or your whole home on Airbnb while you’re away creates rental income, with deductions apportioned by floor area and time. It can also reduce your main residence CGT exemption for the periods it’s rented. See the main residence exemption.
GST
Residential short-stay accommodation is generally input taxed, so no GST is charged or claimed. Commercial residential premises, like a hotel or serviced apartment complex, are treated differently.
Land tax
In NSW, a holiday home isn’t your principal place of residence, so it counts towards your land tax threshold.
When you sell
A holiday home generally isn’t your main residence, so the gain is subject to CGT, with the 50% discount if owned for more than 12 months. Keep records of purchase costs, improvements and the rental periods. See capital gains tax for property investors.
Keep good records
A booking calendar showing rented, available and private periods; advertising and platform statements; and all expense invoices. That’s what supports the claim if the ATO asks.
We prepare rental schedules for holiday homes and short-stay properties as part of our personal tax returns, from $285 + GST.