ATO Draft Ruling TR 2025/D1: What Rental Property Owners Need to Know

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The ATO has released Draft Taxation Ruling TR 2025/D1 on how individuals (not running a rental business) should treat income and deductions from rental properties.

If you own a rental, holiday house or short-stay property (Airbnb, Stayz, Booking.com, etc.), this is aimed squarely at you.

Who is in the frame?

TR 2025/D1 covers individuals who own:

1. Long-term residential rentals
2. Holiday homes and short-stay properties
3. Properties used by family and friends, including at “mates’ rates”
4. Mixed-use properties (part private, part rental)

It doesn’t target large-scale rental businesses – this is about typical mum-and-dad investors.

The ATO’s main messages

1. 1. Most amounts you receive are rental income

      If someone pays to use your property, the ATO generally treats it as rental income, including:

      1. Long-term rent
      2. Short-stay bookings
      3. Amounts from family and friends (even if heavily discounted)

      All of that needs to be declared in your return.

   2. Holiday homes are under much closer scrutiny
      

      The biggest shift is for holiday homes and short-stay places you also use yourself.The ATO may treat some as “leisure facilities”. If they decide your property is not mainly used to earn income, they can deny key ownership deductions such as:

      1. Loan interest
      2. Council rates and land tax
      3. Insurance
      4. General repairs and maintenance

      They’ll look at things like:

      1. Are you genuinely available at commercial rates, especially in peak holiday periods?
      2. Do you block out school holidays or long weekends for your own use?
      3. Do you regularly knock back genuine bookings for non-commercial reasons?

      If it looks more like a private holiday house with a bit of income on the side, deductions are at risk.

   3. Running costs: yes, but often apportioned

      Many running costs are still deductible to the extent they relate to earning income, e.g.:

      1. Advertising and listing fees
      2. Agent/platform commissions
      3. Cleaning between guests
      4. Guest consumables

      But where there’s private use, you’ll need to apportion those expenses between private days and income-producing days using a method the ATO would consider fair.

   4. Family and “mates’ rates” still count

      The ATO is paying close attention to family/friend stays:

      1. Discounted stays still generate assessable income
      2. Deductions may be scaled back where arrangements are clearly non-commercial
      3. You’ll usually need to split expenses between:
         1. Commercial guest bookings, and
         2. Private or below-market family/friend use

      In short: you can’t claim full deductions on what is effectively the family shack.

   5. Better records are non-negotiable

      Having an online listing is no longer enough. The ATO expects:

      1. A calendar showing when the property was:
         1. rented
         2. genuinely available to rent
         3. blocked out for private use<
      2. Booking and enquiry records, including rejected bookings
      3. Advertising details – where, when and at what price you listed
      4. Apportionment workings – how you split expenses between private and income-producing use

Good records are your best defence in a review.

What should you do now?

Even though TR 2025/D1 is still a draft, it’s a clear signal. Now is the time to:

1. 1. 1. Map your actual use – set up a simple calendar for the past and coming 12 months.
      2. Check how “commercial” you look – especially in peak periods.
      3. Tidy your paperwork – bookings, invoices, platform statements, apportionment calculations.
      4. Revisit the numbers – especially if your holiday home is heavily negative-geared.

Talk to us

This is a general summary only and doesn’t take your circumstances into account.

If you own a rental, holiday home or short-stay property and you’re unsure how this draft ruling might affect you, get in touch with the team at Mead Partners – we can step through your specific situation and help you put a plan in place.