ATO Property Tax Deductions 2025: What Australian Property Owners Need to Know About TR 2025/D1

Why Has the ATO Updated Property Deduction Rules in TR 2025/D1?

The Australian Taxation Office (ATO) released draft ruling TR 2025/D1 to clarify tax deductions for rental properties, including holiday homes and short-stay rentals like Airbnb. The ATO is concerned some owners claim deductions for properties mainly used personally rather than genuinely rented for income. This ruling explains which expenses are deductible and when they are not.

Which Property Tax Deductions Remain Unchanged Under TR 2025/D1?

You can still claim property deductions if your property is:

• Rented out long term
• Not used privately by you, family, or friends
• Held primarily to earn rental income

You may claim deductions for:

• Loan interest
• Council rates and land tax
• Repairs and maintenance
• Agent management fees
• Depreciation
• Insurance costs

Remember, these claims require the property not be used for private leisure.

Key Changes to Holiday Home Tax Deductions Under TR 2025/D1

The new ruling sets stricter rules for mixed-use properties such as holiday homes and short-stay rentals. If your property is mainly used for recreation or personal use, many ownership costs may no longer be deductible, including:

• Loan interest
• Council rates and land tax
• Repairs and maintenance related to personal use
• Insurance
• Cleaning and gardening outside rental periods

Previously, some owners claimed deductions despite occasional private use. The updated rules make this harder.

How Does the ATO Assess Property Use for Tax Deductions?

The ATO considers several factors:

• The ratio of rental days to private use days
• Availability for rental during peak seasons
• Realistic, market-based pricing
• Acceptance of reasonable booking requests
• Whether the property is mainly for investment or lifestyle

Higher levels of private use increase the risk of denied deductions.

High-Risk Property Use Scenarios That May Limit Tax Deductions

The ATO will closely examine situations such as:

• Holiday homes frequently used by the owner
• Beach houses mainly for family use but occasionally on Airbnb
• Properties blocked from rental during peak seasons for personal use
• Rentals priced unrealistically to avoid bookings
• Owners repeatedly rejecting reasonable rental requests

Such use may cause the property to be classed as a “leisure facility,” making many holding costs non-deductible.

Low-Risk Property Rental Scenarios That Qualify for Full Deductions

Deductions are generally safe if:

• The property is rented long-term with no private stays
• Market rates are charged consistently
• Professional management without owner use
• The property is available to the public year-round

These scenarios present low audit risk under the ruling.

What Australian Property Owners Must Do Now to Protect Tax Deductions

For any holiday home, Airbnb, or short-stay rental with mixed or private use, owners should:

• Log and document all private stays, including short visits
• Ensure the property is genuinely available to rent during peak periods
• Advertise with realistic market rates
• Keep detailed records of bookings, advertising, and stay history
• Be ready to apportion costs fairly between rental and private use
• Obtain advice from a qualified tax professional before the new tax year

Good recordkeeping and clear evidence are critical for protecting deductions under TR 2025/D1.

H&R Block’s Expert Advice on Property Tax Deductions and TR 2025/D1

H&R Block Australia strongly recommends that property owners:

• Review their property's primary use and rental activity now
• Contact local H&R Block tax specialists for tailored advice
• Get assistance documenting claims and ensuring compliance with the new rules

Proactive planning will help keep deductions valid and reduce audit risk under the significantly tightened ATO scrutiny in 2025 and beyond.