If you own a beach house or Airbnb that you rent out and sometimes use yourself, here is the good news first: ruling TR 2026/1 does not stop you using your own property. Owner stays are completely allowed. What the ruling, finalised on 20 May 2026 and now legally binding, does is draw a clearer line for when private use starts to affect your deductions. Get the balance right and you can keep enjoying your place and keep your tax benefits. That line starts to matter from 1 July 2026.
General information only. This article explains a tax ruling in plain terms. It is not personal tax advice. Your situation depends on your own facts. Speak to a registered tax agent about your specific property before you act.
Lane Property · Airbnb management across Brisbane, the Gold Coast and the Sunshine Coast
Good news first: you can still use your own holiday home. The ATO's finalised rules (TR 2026/1) do not ban owner stays. They just draw a clearer line for when your private use starts to reduce your tax deductions.
Use your place sensibly and you can enjoy it and keep your deductions. This is settled law now, and the line starts to matter from 1 July 2026. Here is the whole thing without the jargon.
Until now, if you used your holiday home privately for part of the year, you generally just reduced your claims by roughly that share. Use it yourself for a month, claim about eleven months' worth of costs. Proportional and fairly forgiving.
The new approach is more all-or-nothing. The ATO now asks one question: is this property mainly there to make money, or mainly there for you and your family to enjoy? If it cannot see a genuine money-making rental, it can switch off your biggest deductions entirely, not just trim them.
Think of it as two buckets.
Genuinely available most of the year, advertised at sensible prices, and actually booked, including during some of the busy periods. You use it privately only occasionally, in quiet times. You are fine. You claim your costs, with a small reduction for the private use.
You keep the best weeks for yourself, only list it when it suits you, or rent it cheaply to family and friends. This is the one the ATO is targeting, and it can deny your major deductions.
The key thing: owner stays happen in both buckets. The difference is not whether you use the place, it is how much and when. Occasional use in quiet periods keeps you in Bucket 1 with your deductions intact. Reserving the peak weeks for yourself is what tips you into Bucket 2.
The catch: it is up to you to prove you are in Bucket 1. You need to be able to explain, with records, why your own use does not stop the property being held mainly to earn income.
The single biggest warning sign is blocking out all the peak periods, being Christmas, Easter and school holidays, for your own family. Others include advertising at silly-high prices so nobody books, barely trying to rent it out, knocking back applicants, and charging "mates rates" to family or friends. And simply having it listed on Airbnb is not enough on its own.
If your property lands in Bucket 2, you lose the big ongoing ownership costs.
Depreciation and capital works are a separate set of rules that this ruling does not deal with. Ask your accountant how they apply.
The ATO's own Example 12 features Carla, who owns a beach house in the Whitsundays. She advertises it year-round through an agent, but blocks it out for herself every Easter, Christmas and New Year, and school holidays, knocks back most applicants, and has even cancelled bookings to use it. It is rented out, on average, just 5 days a year. Verdict: it is a holiday home held mainly for the family, so Carla must still declare the rent but cannot deduct any of the ownership costs.
Contrast that with Eve (Example 11), who only uses her place 1 to 2 nights a year in the off-season and never blocks the peak periods. Hers stays a genuine rental, deductions intact, just apportioned for those nights. Same kind of property. Different behaviour. Very different tax bill.
If you let the place to family or friends cheaply, two things happen at once: you still have to declare that rent as income, but your deductions get apportioned down, so you cannot manufacture a tax loss out of a mates-rates deal. Genuine family arrangements, like a child paying board to a parent, can be treated differently and may not be income at all.
You have until 1 July 2026. Before then:
The difference between keeping your deductions and losing them often comes down to a few weeks of holiday bookings, and whether you can prove it. The rest of this article explains the rules behind all of this, and what the technical terms mean.
Good news: staying in your own property does not have to cost you your tax deductions. The trick is to use it in a way that keeps it mainly an income earner. Do that, and you can enjoy plenty of time in your place while still claiming your costs. Here is how to tip the balance in your favour.
Keeping one peak period for the family, say Christmas, while leaving the others genuinely available for guests, is very different from reserving every peak period for yourself. The owners who get caught block out all the busy weeks.
Outside the busy periods, using your place barely counts against you, because you are not taking nights a guest would have booked. So you can be generous with yourself in the quieter months.
Unbooked midweek nights and last-minute openings are free stays that cost you nothing in lost income. Booking your own time into genuine gaps is the lowest-risk way to use the place often.
A few short breaks usually keep the property looking like a genuine rental far better than reserving a long stretch over a high-demand period.
Advertise at realistic rates, accept genuine bookings, and avoid setting conditions that quietly keep guests out. A property that is truly available is one that earns its deductions.
Demand is local: a coastal property peaks in summer, snow country in winter, a city apartment around big events. Plan your own stays around your property's busy window, not a generic calendar.
A short log of your private nights versus the nights available for rent, plus your booking history, is what lets you show the property is held mainly to earn income if you are ever asked.
You only adjust your deductions for the nights you actually use it personally, which is straightforward and expected. It is a small reduction, not a loss of the lot.
You do not have to give up your peak holidays. You can take a peak period for yourself, just not all of them. Keep the rest of your busy season genuinely available for guests, so the property is still mainly there to earn its income. If you would like to claim more of the peak than that, have a quick chat with your accountant first.
TR 2026/1 is the ATO's finalised ruling on rental income and deductions for individuals who are not running a property business. It confirms that a holiday home you also use personally can be a "leisure facility", and that if it is, the usual ownership deductions can be switched off rather than simply reduced. It was finalised on 20 May 2026, replaces ruling IT 2167, and finalises the November 2025 draft (TR 2025/D1).
The ruling works as a set of three documents.
| Document | What it covers |
|---|---|
| TR 2026/1 | The main ruling on rental income and deductions. Sets out the "leisure facility" treatment for holiday homes and replaces IT 2167. |
| PCG 2026/2 | A practical guide to apportioning deductions when a property is not used wholly to earn income, accepting time-based and floor-space methods on a fair and reasonable basis. |
| PCG 2026/3 | The ATO's compliance approach for working out whether your holiday home is used mainly to produce assessable income under section 26-50. |
The ruling includes 14 worked examples showing how the treatment plays out, a sign the ATO expects this to apply to a lot of ordinary holiday-home arrangements, not just aggressive ones.
The approach flips from a proportional model to a gateway model. Previously, private use broadly reduced your deductions by that share. Under TR 2026/1 the ATO asks a threshold question first: is the property held mainly to produce assessable income? If the answer is no, section 26-50 can deny the ownership costs altogether.
That word, "mainly", which the ATO reads as "chiefly; principally; for the most part", is doing a lot of work. It is a predominant-purpose test, not a simple day-count. As the ruling puts it:
"a simple analysis of the times during an income year that a holiday home is actively used for rental purposes is inadequate by itself."
What matters is the pattern of use, especially whether the property is genuinely available when it is most desirable as a holiday destination.
| Old approach (IT 2167) | TR 2026/1 | |
|---|---|---|
| Test | Proportional. Split costs by private vs rental days. | Threshold. Is it held mainly for income? |
| Private use | Deductions reduced by the private share. | Ownership deductions can be denied entirely under s 26-50. |
| What counts | Day counts. | Pattern of use plus availability during peak demand. |
| If you pass | Partial deductions. | Deductions kept, then apportioned for private use. |
Failing the gateway is not the only outcome. If your property genuinely is held mainly for income and you use it privately now and then, section 26-50 should not apply. Instead you apportion the costs using the methods in PCG 2026/2. The danger zone is the property that looks more like a private getaway with a rental sideline. You can read the ruling in full on the ATO website.
Section 26-50 denies deductions for the costs of owning or holding a "leisure facility", and a holiday home is a type of leisure facility. The escape hatch, subparagraph 26-50(3)(b)(ii), is that if at all times during the income year you use or hold the property mainly to produce assessable income, being rents, lease premiums, licence fees or similar, the denial does not apply. If you cannot show that, the ownership deductions are denied, not trimmed. So there are two outcomes.
Held mainly to produce income with some private use: costs are apportioned, not denied. This is where most genuine rentals sit.
Holiday home not held mainly for income: section 26-50 denies the ownership and holding costs.
The ruling lists the common ownership expenses caught by section 26-50 (paragraph 94): interest on borrowings to finance the property, council rates, land tax, and repairs and maintenance. Costs that do not relate to ownership, being advertising to find guests, and platform or agent fees, remain deductible to the extent they earn rent. In the ATO's Example 13, the owners are denied their ownership costs but can still claim 100% of the platform's service fees.
A note on depreciation. The ruling expressly does not deal with decline-in-value (Division 40) or capital works (Division 43) deductions. Those sit under separate rules. Do not assume depreciation is denied because of TR 2026/1. How Divisions 40 and 43 apply to a holiday home is a separate question for your accountant.
A small silver lining: costs denied under section 26-50 may form part of the property's cost base for capital gains tax (the third element costs under Division 110), which can reduce a future taxable gain. It is a deferral, not a rescue. Confirm the treatment with your tax agent.
Because deductions are denied unless you can show the property is held mainly for income, the practical burden sits with the owner. The good news is the evidence is simple to keep, and a normal, well-run rental produces most of it automatically. The ruling says owners should be able to objectively explain why their own private use does not detract from the property being used or held mainly to derive assessable rental income. So keep:
The warning signs are about a clear pattern of putting personal use first, not the odd weekend away. The standout is blocking out peak periods for personal use, but the ATO also points to advertising at rates that deter bookings, only making the property available in low-demand stretches, and imposing barriers that stop it actually being rented.
The ruling adds a useful point: peak demand depends on location. A coastal property peaks in summer, a ski property in winter, and a city apartment around major events. Reserving your property's peak window is what hurts.
One thing to avoid. Under subsection 26-50(7), if you enter a scheme designed to dodge the "mainly income" test, the ATO can deny the deductions anyway. Keep your arrangement genuine and you have nothing to worry about here.
If a property does end up treated as a holiday home not held mainly for income, the costs at stake are the ownership ones, the big-ticket items that usually drive a negatively geared loss. Costs that directly earn the rent stay deductible either way. This is what the line is really about.
| Expense | If held mainly for private use |
|---|---|
| Interest on borrowings | Denied |
| Council rates | Denied |
| Land tax | Denied |
| Repairs and maintenance | Denied |
| Advertising to find guests | Retained |
| Platform or agent fees | Retained |
Depreciation sits outside this table. Decline-in-value (Division 40) and capital works (Division 43) are governed by separate rules that TR 2026/1 does not deal with. Ask your accountant or quantity surveyor how they apply to your property.
And even if costs are denied, they may still count toward the property's cost base for capital gains tax, which can reduce a future taxable gain when you sell. It softens the blow, but it is a deferral, not a rescue. Confirm the treatment with your tax agent.
Charging below-market rent does not get you off the hook on income, and it limits your deductions. Any rent is assessable even if it is not at arm's-length rates, including discounted stays by friends or family. But when you rent cheaply, your deductions are apportioned down to reflect the non-income-producing purpose, so you cannot generate a deductible loss from a mates-rates arrangement (Example 6). There is a genuine distinction for household and family arrangements:
Take Carla (Example 12): a Whitsundays beach house, advertised year-round through an agent, but reserved for the family every Easter, Christmas and New Year, and school holiday, with most applicants knocked back. It rents around 5 days a year. The ATO treats it as a holiday home held mainly for the family. Carla declares the rent but can deduct none of the interest, rates, land tax or repairs. Only advertising, and agent fees remain claimable.
Now change the facts. In Example 14, Carla moves overseas on 1 January, removes all the personal-use restrictions, and has her agent market the house actively, and from that date it is almost always occupied by paying guests. Because there is a clear and sustained change in use, she can claim deductions as a genuine rental from 1 January, apportioned for any remaining private or capital use. Same house. The deductions follow the behaviour and evidence, not the address.
TR 2026/1 is already in force, but the section 26-50 treatment is cushioned by a transitional approach. The ATO has said it will not devote compliance resources to whether section 26-50 applies to expenses incurred before 1 July 2026, unless there is avoidance, fraud or evasion, or someone takes inappropriate advantage of the concession. If you ask the ATO to issue or amend an assessment, or seek a private ruling, it will still apply the ruling's views. In plain terms, the practical start line is the 2026-27 income year, which gives you a sensible window to get things in order.
Yes. Nothing in TR 2026/1 stops you using your own property, and occasional private use does not automatically cost you your deductions. In the ATO's Example 11, an owner who uses her place a night or two a year in the off-season keeps her deductions, simply apportioned for those nights. You only run into trouble when private use becomes the property's main purpose, like reserving the peak periods for family.
It is final and legally binding. The Commissioner issued it on 20 May 2026, finalising the November 2025 draft (TR 2025/D1) and replacing the old ruling IT 2167. It applies to income years both before and after its issue date, subject to a transitional compliance approach for the section 26-50 treatment.
Not automatically. Some private use is fine if the property is held mainly to produce assessable income, in which case your costs are apportioned, not denied. You only lose ownership-cost deductions if the property is a holiday home that is not held mainly for income, like a place where you reserve the peak periods for family use.
The ownership costs: loan interest, council rates, land tax, and repairs and maintenance. Costs that directly earn rental income, being advertising, and platform or agent fees, generally remain deductible. Denied costs may still count toward your capital gains tax cost base on a later sale.
Not directly. The ruling does not deal with depreciation. Decline-in-value (Division 40) and capital works (Division 43) deductions are governed by separate rules that TR 2026/1 expressly leaves out of scope. How they apply to a holiday home is a question for your accountant or quantity surveyor.
Blocking out peak periods for your own use, reserving Christmas, Easter or school holidays. It signals the property is not genuinely held to maximise rental income. In the ATO's examples, a beach house advertised year-round but reserved over the holidays, and rented only around 5 days a year, is treated as a non-deductible holiday home.
You can, but the tax outcome is unfavourable. Discounted "mates rates" rent is still assessable income, while your deductions are apportioned down, preventing a deductible loss. Genuine household or family arrangements, such as a child paying board, may not be assessable at all, but the line is fact-specific.
The reassuring takeaway is that you do not have to choose between enjoying your holiday home and claiming on it. Most owners can do both. It just comes down to keeping the property mainly an income earner and being able to show it. Before 1 July 2026, a quick review of three things sets you up.
Professional short-term rental management quietly handles most of this for you. Genuine year-round availability, dynamic pricing that targets occupancy, and a full booking and marketing record are exactly the evidence that keeps a property on the right side of the "mainly income" test, while you still take your off-peak stays. Lane Property manages Airbnb and short-stay properties across Brisbane, the Gold Coast and the Sunshine Coast on a flat 18% + GST fee, with the booking data and statements to back it up.
See what your property could earn → How Lane manages short-term rentals →General information only, current as of June 2026. This is not personal tax advice and your situation depends on your own facts. Run it past a registered tax agent. For more on Airbnb tax in Queensland, see our EOFY tax guide for Brisbane Airbnb hosts.
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