Category: Taxation

Working from home has become normal for a lot of Australians, but the tax rules have not changed to make every home expense claimable just because your job has moved into your living room. The ATO has recently warned that some taxpayers are claiming rent, mortgage interest and other occupancy expenses that they are not actually entitled to, often because they have confused the rules that apply to employees with the rules that apply to a genuine home based business.

Two different types of expenses

Type	What it covers	Who can usually claim it
Running expenses	Electricity, internet, phone, depreciation of a computer or desk	Most employees who work from home
Occupancy expenses	Rent, mortgage interest, council rates, home insurance	Only taxpayers who meet the ‘place of business’ test

 

The ‘place of business’ test

To claim occupancy expenses, you need to be able to show all of the following:

• the area of your home you use for work has the character of a ‘place of business’
• if you are an employee, it was necessary for you to work from home because your employer did not provide you with an alternative place of business
• the nature of your income earning activities requires you to have a place of business

Is your home office really a ‘place of business’?

The ATO looks at whether the area of your home is:

• clearly identifiable as a place of business
• not readily capable of private or domestic use
• used exclusively, or almost exclusively, for work
• used regularly for client or customer visits

Two real examples

In plain terms, if the space could just as easily be used as a spare bedroom, a playroom or a home gym on the weekend, it is unlikely to meet this test, even if you personally only ever use it for work. Two examples the ATO uses help make the difference clear.

Priya works as a salesperson and is offered a promotion to manage a wider region. Her new role is based at her employer’s office in another city, but her employer is flexible and lets her work from home instead. Because her employer does provide her with an office, even though she chooses not to use it, Priya cannot claim occupancy expenses. She may still be able to claim running expenses for the time she spends working from home.

Abdul runs his own business from a dedicated office at home. Tradespeople and contractors regularly visit him there to discuss jobs, his business does not provide him with an alternative office anywhere else, and the nature of his work genuinely requires him to have a place of business. Abdul can claim a portion of his occupancy expenses, because he meets all three parts of the test.

What you can claim if you are eligible

If you meet the test, you can claim a portion of occupancy expenses based on the floor area used for work, how much of the year it was used, and your share of ownership if the property is jointly owned or rented.

Most employees will not meet this test. Choosing to work from home, even permanently or because it suits your lifestyle, does not on its own create a place of business. Most employees are instead limited to running expenses.

It is also worth knowing that claiming occupancy expenses is not free of downstream consequences. If part of your home has the character of a place of business, you may lose part of the main residence exemption from capital gains tax when you eventually sell the property, even just for the portion used for work. This is a genuine trade off worth discussing with us before you decide to claim occupancy expenses, not something to consider only when you come to sell.

Common working from home mistakes beyond occupancy expenses

Occupancy expenses are not the only area where WFH claims go wrong. Other common mistakes include claiming the full cost of an expense that is only partly work related, such as a home internet plan also used for streaming and browsing, claiming running expenses without any reasonable basis for the hours worked from home, and double claiming an item, such as claiming a laptop as a running expense in full while also depreciating it separately.

Keeping a simple, honest record of hours worked from home across the year, along with receipts for anything you plan to claim as an actual expense, avoids most of these issues before they start.

Working out your claim if you are eligible

If you do meet the place of business test, working out the deductible portion of occupancy expenses generally comes down to three figures: the floor area of the part of your home used as a place of business, expressed as a percentage of your home’s total floor area, the proportion of the year that area was set aside for work, and your share of ownership if the property is jointly owned or rented.

Multiplying your total occupancy expenses by these factors gives the deductible portion. It is a calculation worth doing with us rather than estimating, given how much rides on getting the place of business test right in the first place.

Frequently asked questions

Q. I work from home five days a week. Does that automatically qualify me for occupancy expenses?

No. Choosing to work from home, even permanently, does not on its own meet the place of business test, especially if your employer still has an office available to you.

Q. Can a sole trader claim occupancy expenses?

Possibly, if part of their home genuinely operates as their place of business. It is worth checking your specific situation with JMB before you claim.

Q. What happens if I claim occupancy expenses incorrectly?

It can trigger a review or audit, and you may need to repay the deduction along with interest and penalties.

Q. What is the difference between running expenses and the fixed rate method?

Running expenses are the underlying costs, like electricity, internet, phone and depreciation of equipment. The fixed rate method is simply one of the ways the ATO allows you to calculate a deduction for those running costs, without needing to work out the exact cost of every individual expense.

Q. Can my employer’s policy on working from home affect what I can claim?

It can be relevant to whether working from home was genuinely necessary, but it does not change the basic test. If your employer provides you with an office, choosing to work from home instead generally still will not qualify you for occupancy expenses, regardless of your employer’s policy.

Sources

ATO, Occupancy expenses: https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/work-related-deductions/working-from-home-expenses/occupancy-expenses

The ATO does not rely only on what you tell it. It also collects data from a wide range of other government sources and matches it against what has been reported, to spot gaps before they become a problem. This is not a new or unusual practice. The ATO runs dozens of these programs across everything from share trading to ride sourcing, but two current programs show just how far the ATO’s reach into everyday transactions actually extends.

Motor vehicle registries data matching

Detail	What applies
Data source	8 state and territory motor vehicle registries
Collection period	2026 to 2030 financial years
Who it affects	Around 2.5 million individuals each financial year
What is collected	Buyer and seller details, transaction dates, sale prices, market values, vehicle garage address, intended use, vehicle specifications and registration details
What it is used for	Checking GST, FBT, fuel tax credit and income tax compliance, plus risk modelling and case selection

 

Electoral roll data matching

The ATO also obtains electoral roll information from the Australian Electoral Commission, covering around 18 million records every quarter.

This data includes registered voters’ names, addresses, sex, dates of birth and occupations, and is compared against ATO records to help identify non compliance with tax and superannuation obligations.

This program is not new either. The Australian Electoral Commission has been providing this data to the ATO since before 2016, and it continues largely because it is a reliable way for the ATO to locate taxpayers with incomplete or outdated address details, and to check compliance with Australia’s foreign investment rules around property ownership.

This is part of a much wider pattern

Motor vehicles and the electoral roll are just two of many data sources the ATO regularly matches against tax records. Other current and past programs have covered novated leases, company officeholders, offshore merchant transactions, private health insurance, property management, real property transactions, rental bonds, ride sourcing platforms, share transactions, and sharing economy accommodation.

Taken together, these programs mean the ATO often already has a reasonably complete picture of an individual’s financial activity well before a tax return is lodged.

Why the ATO does this

On its own, a data mismatch does not mean you have done anything wrong. It is one signal among many the ATO uses to decide where to look more closely.

For example, motor vehicle data can help the ATO notice when someone reports a low income but has purchased an expensive vehicle, which may prompt a closer look at their return.

The ATO’s power to collect this data comes from formal information gathering powers under the Taxation Administration Act, which data holders like state motor vehicle registries are legally required to comply with. Its use is also governed by Australia’s privacy laws, which limit the ATO to using the data for purposes like enforcement and compliance activity, rather than for unrelated purposes.

Keeping accurate, complete records, and reporting income and private use correctly, is the simplest way to make sure any data match works in your favour, not against you.

What this means if you are buying or selling a car this year

If you are planning to buy or sell a vehicle worth $10,000 or more, it is worth simply making sure your tax return reflects the transaction accurately, since this is exactly the kind of data point the motor vehicle registries program is designed to pick up.

This is particularly relevant if the vehicle is used partly for business, since the ATO can compare the purchase against declared income, GST claims, and any fringe benefits tax obligations connected with the vehicle.

The bigger compliance picture

Data matching programs like these sit alongside other ATO compliance activity, including its ongoing focus on rental property expenses and work related deductions. None of these programs operate in isolation.

Together, they give the ATO a broader, more joined up view of an individual’s financial position than many taxpayers realise, which is exactly why accurate, consistent reporting across every part of a tax return matters, not just the areas that feel most obviously scrutinised.

Frequently asked questions

Q. Does the ATO need my permission to collect this data?

No. The ATO has formal legal powers under the Taxation Administration Act to require this information from data holders like state motor vehicle registries and the Australian Electoral Commission.

Q. Will I be told if my data is matched?

Not automatically. Data matching runs in the background as part of the ATO’s normal compliance work. You would generally only hear from the ATO if a mismatch raises a specific question about your return.

Q. Should I be worried if I bought a car recently?

Not if your return is accurate. The program is aimed at identifying non compliance, not at penalising ordinary purchases that are properly accounted for.

Q. What should I do if I think a data match might raise a question about my return?

The best approach is to get ahead of it. If you know a past return may not fully reflect a vehicle purchase, a property transaction, or another matched data source, talk to us before the ATO raises a query, rather than waiting to respond to a letter.

Sources

ATO, Motor vehicle registries data matching program protocol: https://www.ato.gov.au/about-ato/commitments-and-reporting/in-detail/privacy-and-information-gathering/how-we-use-data-matching/motor-vehicle-registries-data-matching-program-protocol

ATO, Commonwealth electoral roll data: https://www.ato.gov.au/about-ato/commitments-and-reporting/in-detail/privacy-and-information-gathering/how-we-use-data-matching/commonwealth-electoral-roll-data-matching-program-protocol/commonwealth-electoral-roll-data

Not every year is a good year, even for a well run business. Economic conditions shift, a major project can fall through, or a contract can be delayed, and a company that has been consistently profitable can suddenly find itself with a loss on the books. If your company moves from a profit to a loss, there is now a way to turn that loss into cash back in your pocket, rather than simply carrying it forward and hoping for a better year ahead. The loss carry back tax offset, first used during COVID and then scrapped, has been reintroduced, and it is now law.

How loss carry back works

Eligible companies that make a tax loss in an income year can carry that loss back and offset it against tax they paid in either, or both, of the previous two income years.

Instead of waiting for a future profitable year to use the loss, the company can claim a refundable tax offset and get some of that earlier tax paid back as a cash refund.

The measure applies to income years starting on or after 1 July 2026, with eligible companies first able to claim the offset in their 2026 to 2027 tax return.

This is not a new idea. A very similar loss carry back measure applied temporarily during the COVID period, covering the 2019 to 2020 through to the 2022 to 2023 income years, and helped many companies manage cash flow through a genuinely difficult stretch. The measure was then allowed to lapse. Its return in the 2026 to 2027 Budget follows the same basic design, but this time it has been reintroduced as an ongoing measure rather than a temporary, time limited one.

Who is eligible

• Corporate tax entities, meaning companies and some other entities taxed as companies, with an aggregated annual global turnover under $1 billion. In practice, this covers almost every private company in Australia.
• The offset only applies to revenue losses, not capital losses.
• The refund is limited by the company’s franking account balance, so a company with little or no franking credits may not receive the full refund it would otherwise be entitled to.

Understanding the franking account limit

The franking account limit is one of the more confusing parts of loss carry back, so it is worth explaining properly. A company’s franking account tracks the tax it has paid, and franking credits are what allow that tax to be passed on to shareholders as a credit when franked dividends are paid.

When a company claims a loss carry back refund, the refund is debited against its franking account balance, the same way a franked dividend would be. If a company’s franking account balance is lower than the refund it would otherwise be entitled to, the refund is simply capped at whatever balance remains.

This means two companies with an identical trading loss and an identical amount of tax paid in prior years could end up with quite different refund amounts, purely because one has already used up more of its franking credits through dividends paid to shareholders.

A simple example

Year	What happens
2024 to 2025	The company pays company tax on a profitable year.
2026 to 2027	The company makes a trading loss and elects to carry it back.
Outcome	The company may receive a refundable offset for some or all of the earlier tax paid, limited by its franking account balance.

 

How to actually claim it

Loss carry back is not automatic. A company needs to make a specific choice, known as an election, to carry a loss back rather than simply carrying it forward in the usual way.

This election is generally made as part of preparing the company’s tax return for the loss year, which is why it is worth discussing your position with us before your return is lodged, not after.

Why it matters

It can meaningfully improve cash flow in a loss year, exactly when a business needs it most.

Using loss carry back is a choice, not an automatic outcome. A company might prefer to carry a loss forward instead, particularly if it expects strong profits soon and franking credits are already limited.

This is a decision worth making with proper advice, not a box to tick when lodging. Talk to JMB before you lodge a return in a loss year.

What if my franking account balance is low

If your company has not paid much tax in the past two years, or has already used its franking credits to pay dividends, loss carry back may only provide a partial refund, or none at all. This does not mean the loss itself is wasted. Any amount of the loss you do not carry back can still be carried forward in the usual way, to offset against future profits once your company returns to a taxable position.

This is why loss carry back works best as part of a broader conversation about your company’s tax position, rather than a decision made in isolation. Dividend timing, franking account management and loss carry back all interact with each other, and getting the sequencing right can make a genuine difference to your outcome.

Common misunderstandings about loss carry back

A few misconceptions come up regularly. Loss carry back is not a cash grant unrelated to tax already paid. It is specifically a refund of tax your company has already paid in an earlier profitable year, so a company that has never paid company tax has nothing to carry a loss back against.

It also does not apply automatically. Without a specific election in your tax return, a loss will simply be carried forward as it always has been. And it is not compulsory. Even an eligible company might choose not to use it, if carrying the loss forward against expected future profits makes more sense for its overall tax position.

Frequently asked questions

Q. Does loss carry back apply to sole traders or trusts?

No. It only applies to corporate tax entities, meaning companies and similar entities taxed as companies.

Q. Can I carry back a capital loss?

No. Only revenue losses are eligible for loss carry back.

Q. Do I have to use loss carry back if I am eligible?

No, it is optional. You can choose to carry the loss forward instead if that suits your circumstances better.

Q. How far back can I carry a loss?

You can carry a loss back against tax paid in either, or both, of the two income years immediately before the loss year.

Q. Does my company need to have been profitable every year to use loss carry back?

No, but you do need to have paid company tax in at least one of the two prior income years, and have a franking account balance to draw on, or there will be little or nothing to refund.

Sources

ATO, Tax loss carry back law now passed: https://www.ato.gov.au/businesses-and-organisations/business-bulletins-newsroom/tax-loss-carry-back-law-now-passed

A new scam email is doing the rounds, and it is designed to look exactly like a genuine message from the ATO. Scams like this tend to spike around tax time, when people are already expecting to hear from the ATO and are less likely to question a message that looks official. Knowing the specific red flags can save you from handing over your myGov login to a criminal.

How the scam works

The email claims a phone appointment with the ATO has been scheduled, and includes convincing details like a date and time.

It tells you to open an attachment to “securely access relevant services” or to reschedule the appointment.

That attachment contains a link to a fake, but realistic looking, myGov sign in page, built purely to steal your username, password and other personal details.

What makes this version convincing is the specific, believable detail. Rather than a vague, generic message, it includes an appointment date, a time, and an appointment type, details that make it feel like a real administrative notice rather than an obvious phishing attempt.

This is not an isolated incident

This myGov appointment scam is only the latest in a string of impersonation attempts the ATO has publicly warned about. Recent alerts have also covered a fake DocuSign style email carrying a document called a ‘Declaration and Final Release’, and a cryptocurrency themed email demanding taxpayers ‘declare’ holdings in an undisclosed digital wallet by calling a phone number in the email.

The details change, but the underlying pattern does not: an unexpected message, a sense of urgency, and a link or attachment designed to steal your login details.

What the ATO will never do

The ATO has confirmed it will never:

• email you an attachment that contains a link to a myGov sign in page
• ask you to access ATO services through a link in an unsolicited email
• direct you to a login page that is not hosted on an official myGov or ATO website
• ask for your myGov username, password, or security code by email

What to do if you receive it

• Do not open the attachment, and do not click any link inside it.
• Do not reply to the email or call any number it provides.
• Check the sender’s actual email address, not just the display name. A scam email might display as “Australian Taxation Office” while the underlying address is completely unrelated to a genuine government domain.
• If in doubt, access ATO or myGov services by typing the address into your browser yourself, or through the official app, rather than through any link in the message.
• If you are ever unsure whether a message claiming to be from the ATO is genuine, contact JMB or the ATO directly through a channel you already know and trust, not through anything in the email itself.

A closer look at checking a link before you click

If you want to check a link without clicking it, hovering your mouse over it on a computer will usually show the actual destination address in a small preview, often at the bottom of the screen. On a phone, holding your finger on a link, without tapping it, will often show a preview of where it leads.

If that address does not clearly end in a recognised government domain, treat it as suspicious, even if the email itself looks convincing.

If you run a business, warn your team too

Scam emails like this are not only sent to individuals. If your business has staff who handle finance, payroll or administrative tasks, it is worth making sure they are aware of this specific scam and the ATO’s general rules about what it will never ask for by email.

A quick heads up to your team can prevent a single distracted click from turning into a much bigger problem.

Frequently asked questions

Q. What if I already opened the attachment?

Do not enter any login details if you have not already done so. If you have entered your myGov username or password, change your password immediately and contact Services Australia.

Q. How can I report a scam email like this?

You can report it to Scamwatch, and forward suspicious ATO related emails to the ATO’s own reporting address.

Q. Are phone scams different from this email scam?

Yes. This is a separate, email based scam. If you want to check whether a phone call claiming to be from the ATO is genuine, see our earlier article on verifying ATO calls.

Q. How does the ATO usually contact me if there is a genuine issue?

The ATO does use SMS and email for some legitimate purposes, but it will never ask you to log in to myGov through a link in that message, or to open an attachment containing a sign in page. If you are unsure, contact the ATO or JMB directly using details you already have, not anything provided in the message.

Q. Are older Australians more at risk from scams like this?

Anyone can be targeted, including people who are not required to lodge a tax return at all. It is worth sharing this kind of warning with family members, particularly if they are less familiar with checking sender details or hovering over links before clicking.

Sources

ATO, Scam alerts: https://www.ato.gov.au/online-services/scams-cyber-safety-and-identity-protection/scam-alerts

Small business owners have spent more than a decade guessing whether the instant asset write off would still be around next year. That guessing game is over. As part of the 2026 to 2027 Federal Budget, the Government confirmed it would permanently set the instant asset write off threshold at $20,000, and that measure is now law. Whether you run a trades business, a cafe, a small professional practice or an online shop, here is what the change actually means for you, and how to plan around it before 30 June.

What actually changed

From 1 July 2026, eligible small businesses can immediately deduct the cost of eligible depreciating assets that cost less than $20,000, instead of depreciating them over several years.

The $20,000 threshold now applies permanently, rather than being extended year by year at Budget time as it has been since 2023.

The general small business pool threshold has also been permanently set at $20,000 from 1 July 2026.

The ‘lock out rule’, which normally stops a business that opted out of the simplified depreciation rules from re-entering for five years, has been suspended until 30 June 2027. This gives businesses more room to move in and out of the simplified rules without being penalised for it.

A decade of guessing: why this threshold kept moving

To understand why this change matters, it helps to know what business owners have been dealing with. The instant asset write off threshold has moved several times over the past decade: $20,000 from 2016 to January 2019, $25,000 for a few months in 2019, $30,000 later that year, then a temporary jump to $150,000 during the early part of the COVID period, before dropping back to $20,000 from July 2023.

Each of those changes came with an expiry date, and each time, business owners and their accountants had to wait on Budget night to find out whether the threshold would be extended again, reduced, or left to fall back to a much lower figure. That uncertainty made it genuinely hard to plan equipment purchases with any confidence.

Making the $20,000 threshold permanent ends that cycle. From 1 July 2026, there is no expiry date to plan around, which means you can time a purchase based on when your business actually needs the asset, not based on when a temporary concession might disappear.

Who can claim it

• Businesses with an aggregated annual turnover under $10 million. Aggregated means your turnover plus that of any businesses connected with or affiliated to yours.
• The asset must be used, or installed ready for use, for a taxable purpose in your business before the end of the income year you are claiming it in.
• The threshold applies per asset, so a business can claim the write off on several separate purchases in the same year, as long as each one costs less than $20,000.
• If you are registered for GST, the $20,000 threshold is applied to the cost of the asset excluding GST. If you are not registered for GST, the threshold includes GST, so the total price you pay is what counts.

What kind of purchases actually qualify

The write off applies to most depreciating assets you buy for your business, provided each one costs less than $20,000. In practice, this covers a wide range of everyday business purchases, including:

• tools and equipment for trades and construction businesses
• computers, laptops and office technology
• furniture and fit out items for an office, shop or clinic
• kitchen and hospitality equipment for cafes and restaurants
• second hand assets, not just new ones

A quick example

Picture a small plumbing business that needs a new set of diagnostic tools costing $4,500, a laptop for quoting jobs on site costing $1,800, and a new work bench for the workshop costing $2,200. Under the instant asset write off, all three purchases can potentially be deducted in full in the year they are first used or installed ready for use, rather than being depreciated gradually over several years.

Because the $20,000 limit applies per asset rather than as a total spending cap, the business is not restricted to a combined $20,000 across all three items. Each purchase is assessed on its own.

Motor vehicles can also qualify, but passenger cars are subject to a separate, lower car limit that is set by the ATO each year, so not every vehicle purchase will fall under the full $20,000 threshold. It is worth checking with us before you commit to a vehicle purchase, since the vehicle rules are more complex than for most other assets.

Why this matters for planning

You no longer need to wait on a Budget night announcement to decide whether to bring a purchase forward before the end of the financial year.

It can help with cash flow, because you deduct the full cost of an eligible asset sooner rather than spreading it over several years.

Because the threshold now applies permanently, there is less pressure to rush a purchase through before 30 June simply because a concession might disappear. That said, the timing rule itself has not changed: an asset still needs to be used, or installed ready for use, before the end of the income year you want to claim it in, so planning ahead is still worthwhile.

Talk to JMB before you buy. The asset has to be used or ready for use, not simply ordered or paid for, before the end of the financial year you plan to claim it in.

Planning purchases across the financial year, not just at 30 June

A permanent threshold changes the way it makes sense to plan. Under the old system, a lot of small businesses fell into a habit of rushing equipment purchases through in May and June, worried that a concession might not be renewed. That rush often meant buying assets before they were genuinely needed, just to use up the concession while it lasted.

With a permanent $20,000 threshold, there is no reason to bring a purchase forward artificially. It makes more sense to buy equipment when your business actually needs it, whether that is in August, December or May, and simply claim the deduction in whichever income year the asset is first used or installed ready for use. This can lead to better business decisions overall, since purchases are driven by operational need rather than a looming deadline.

What to bring to your appointment

If you are planning to claim the instant asset write off this year, it helps to come prepared. Useful things to bring include:

• a list of assets purchased during the year, with purchase dates and costs
• tax invoices for each asset, showing GST treatment
• a note of the date each asset was first used or installed ready for use, if different from the purchase date
• an estimate of the business use percentage, if an asset is also used privately

 

Quick facts

• Threshold: $20,000 per asset, now permanent from 1 July 2026
• Who qualifies: businesses with aggregated turnover under $10 million
• Applies to: new and second hand eligible depreciating assets used in your business
• Car purchases: subject to a separate, lower car limit
• Status: law, passed as part of the 2026 to 2027 Budget package

Frequently asked questions

Q. Does the write off apply to motor vehicles?

It can, but passenger cars are subject to a separate car cost limit, so not every vehicle purchase will fall under the $20,000 threshold. Talk to us about your specific vehicle before you buy.

Q. What happens if I buy something for more than $20,000?

Assets costing $20,000 or more are generally added to your small business depreciation pool and written off gradually over time, rather than claimed immediately.

Q. Do I need to use the simplified depreciation rules to claim this?

Yes. The instant asset write off is only available if you have elected to use the simplified depreciation rules for the income year you are claiming in.

Q. Can I claim the write off on an asset I use partly for private purposes?

Yes, but only the business use portion. If you use an asset for both business and private purposes, you can only claim the percentage that relates to your business use, and you will need a reasonable basis for working out that percentage.

Q. What if I ordered an asset before 30 June but it has not arrived yet?

The asset needs to be used, or installed ready for use, before the end of the income year you are claiming it in. An asset that is still on order or in transit at 30 June generally does not qualify for that year, even if you have already paid for it.

Sources

ATO, $20,000 instant asset write off (IAWO) here to stay: https://www.ato.gov.au/businesses-and-organisations/small-business-newsroom/20000-instant-asset-writeoff-iawo-here-to-stay

ATO, Making the $20,000 instant asset write off permanent for small businesses: https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/20000-dollars-instant-asset-write-off

Payday Super has changed how often employers need to pay super, and how little room there is left for delay. Contributions now need to be received by an employee’s super fund within 7 business days after payday, instead of once a quarter. For a business used to a single quarterly deadline, this is a genuinely different rhythm, and the margin for error is much smaller. Here is a practical checklist to help you stay ahead of it.

What changed

Super guarantee must now be paid, and received by the fund, within 7 business days after each payday, instead of quarterly.

New employees, or an employee who changes their super fund, generally get a longer window of 20 business days for the initial contribution.

Funds themselves now have only 3 business days to allocate or reject a payment once they receive it, which means errors get flagged much faster too.

It is worth understanding what counts as ‘qualifying earnings’ under the new system, since this is the figure super is now calculated on. Qualifying earnings bring together an employee’s ordinary time earnings, any commissions, amounts they have salary sacrificed to super, and certain other payments that were not always captured consistently under the old quarterly system. If your payroll software has not been updated to correctly calculate qualifying earnings, that is worth checking before your first payday under the new rules.

Your 7 business day checklist

1. Use the member verification request (MVR) before you pay. This lets you confirm an employee’s super fund details are valid, and that the fund can accept the contribution, before you send the money. This is particularly useful for new employees, or whenever an employee tells you they have changed funds.
2. Check with your payroll provider or clearing house that they are actually responding to MVRs, not just submitting them. Not every system handles this automatically, and a request that goes unanswered can leave you assuming a fund is ready to accept a payment when it is not.
3. Monitor every payment after you send it, rather than assuming it has gone through. Funds have only 3 business days to allocate or reject a contribution, so a rejection can appear quickly, and it is far easier to fix within the 7 day window if you catch it early.
4. Act fast on rejections. If a payment is rejected or returned, correct the error and resubmit to the right fund straight away, since there is no extension to the 7 day deadline just because a payment bounced.
5. Build in a buffer. If you use a clearing house, submit payments on payday itself, or even the day before if your systems allow it, to leave room for normal processing time before the clock runs out.

What counts as a business day

The 7 day countdown is measured in business days, not calendar days, which generally excludes weekends and public holidays.

This means the practical deadline can fall later than 7 calendar days after payday, particularly around long weekends, but it also means the countdown can move faster than expected in a short working week. Building a small buffer into your payroll calendar, rather than calculating the deadline manually each time, is the safest way to avoid an accidental miss.

What happens if you miss the deadline

Missing the deadline can trigger the super guarantee charge, which works very differently to simply paying the super a little late.

The charge is calculated on your employee’s full salary and wages, not just their ordinary time earnings, includes interest, adds an administration fee per employee, and is not tax deductible, unlike a normal super contribution. In other words, a late payment can end up costing considerably more than the super contribution itself would have.

Why the old quarterly system caused problems

Payday Super was not introduced for its own sake. Under the old quarterly system, unpaid or underpaid super could go unnoticed for months, since an employee often would not realise a contribution was missing until well after the quarter had closed, by which time chasing it down was harder for everyone involved.

Aligning super with each payday means both employers and employees can see contributions moving in close to real time, which makes errors far easier to catch and correct while they are still small.

Getting your systems ready

Beyond the day to day checklist, it is worth doing a broader systems check before you rely on Payday Super running smoothly. This includes confirming your payroll software has been updated to calculate qualifying earnings correctly, checking that your default fund and any employee elected funds are still active and able to receive SuperStream payments, and reviewing how your business would handle a rejected payment outside normal business hours, such as over a long weekend.

A short conversation with your payroll provider now is far easier than untangling a missed deadline after the fact.

Quick facts

• Standard deadline: 7 business days after payday
• New employee or fund change: 20 business days for the first payment
• Fund’s response time: 3 business days to allocate or reject a contribution
• Qualifying earnings: brings together ordinary time earnings, commissions, and salary sacrificed super into one calculation
• First year: the ATO has said employers who genuinely try to comply will not be the focus of compliance action

Frequently asked questions

Q. What if my payroll provider handles all of this automatically?

Many do, but it is still worth confirming exactly what your provider covers, particularly around member verification requests, since not every system submits these by default.

Q. Does the 7 day rule apply to all employees?

It applies to ordinary employees and to independent contractors who are entitled to super under the extended definition of employee. New employees, or employees who change funds, generally have a longer 20 business day window for the first payment.

Q. Is there any leniency in the first year?

The ATO has indicated that employers who are genuinely trying to comply will not be the focus of its compliance action during the first year of Payday Super, but this is not a free pass to ignore the deadline altogether.

Sources

ATO, Top tips to meet the Payday Super 7 business day timeframe: https://www.ato.gov.au/businesses-and-organisations/business-bulletins-newsroom/top-tips-to-meet-the-payday-super-7-business-day-timeframe

Somewhere out there, more than $21 billion in super is sitting unclaimed, spread across millions of accounts, and some of it might have your name on it. The ATO is actively encouraging Australians to check, and unlike a lot of tax admin, this one genuinely only takes a few minutes and could be worth checking today rather than filing away for later.

How super becomes ‘lost’

Super becomes lost when an account goes inactive, and your fund loses contact with you, often after a change of job, address or phone number.

In some cases, the balance is transferred to the ATO, where it is held until it can be reunited with the right person. This can happen to anyone. It is not just old, forgotten accounts from decades ago.

There are two slightly different categories worth understanding. An account is generally considered lost if it has been uncontactable for 12 months, meaning your fund has lost contact with you and the account has not received a contribution or rollover in that time. An account is considered inactive if it has not received a contribution or rollover for 5 years. Either situation can eventually lead to your super being transferred to the ATO, where it is held as unclaimed super until it is reunited with you.

It happens to more people than you might think

Lost super is not just small change forgotten from a first part time job. The ATO’s own case examples show just how significant the amounts involved can be. In one case, a Melbourne man in his seventies discovered more than $100,000 in an account he had lost track of. In regional Queensland, a woman uncovered a forgotten account worth more than $500,000. In another case, the ATO helped reconnect a married couple approaching retirement with combined super accounts worth more than $1 million, a discovery that genuinely changed their retirement planning.

As ATO Deputy Commissioner Ben Kelly put it, checking for lost super could be ‘the most rewarding five minutes of your life’. Given the amounts some Australians have uncovered, that is not much of an exaggeration.

How to check

1. Log in to myGov and link it to the ATO if you have not already.
2. Go to ATO online services, then select Super, then Fund details.
3. Look for any accounts listed as lost, inactive, or held by the ATO.
4. If you find an ATO held amount, you can usually transfer it into an active super account in a few clicks.
5. If you prefer not to use myGov, you can call the ATO’s lost super search line on 13 28 65.

Why it is worth doing today

Unclaimed super held by the ATO does not sit in the market earning investment returns the way it would in an active super fund. The sooner it is reunited with an active account, the sooner it has the chance to grow again.

The younger you are when you find it, the more time it has to work for your retirement.

What happens to your super once it reaches the ATO

Money transferred to the ATO as unclaimed super does not disappear or become government revenue. It is held on your behalf, and interest is generally applied to keep pace with inflation, although this is usually lower than the investment returns you would expect from an active, invested super account.

Once you are reunited with the money, whether through myGov or another process, it can be paid out to you directly or, more commonly, transferred into an active super fund of your choice.

Worth checking for family members too

Because lost super often results from a change of job, address or phone number, it can be worth helping older family members check as well, particularly parents or grandparents who may have worked for several employers decades ago under different super arrangements.

The ATO’s examples of people in their seventies discovering six figure sums are a reminder that this is not only a young person’s issue.

Quick facts

• Total lost and unclaimed super currently held: more than $21 billion
• Amount returned last year through consolidations and direct payments: more than $1.1 billion
• Average lost super amount: around $41,000

Frequently asked questions

Q. Is checking for lost super free?

Yes. Checking through myGov or the ATO’s phone line is completely free. You should never need to pay a third party ‘super finder’ service to do this for you.

Q. What if I find lost super in an old, high fee fund?

It is worth comparing the old fund against your current active fund before deciding whether to transfer or consolidate, since fees and insurance arrangements can differ. We are happy to help you think this through.

Q. Can lost super affect my insurance inside super?

Possibly. Some funds cancel insurance cover on an account after a period of inactivity, so it is worth checking whether any insurance was lost along with contact, particularly before consolidating accounts.

Sources

ATO, $21 billion in lost super: find yours, fund your future: https://www.ato.gov.au/media-centre/21-billion-dollars-in-lost-super-find-yours

ATO, Searching for lost and unclaimed super: https://www.ato.gov.au/forms-and-instructions/superannuation-searching-for-lost-superannuation

If you own an investment property, your property manager’s annual statement feels like the obvious place to copy your numbers from at tax time. It looks complete, it is prepared by a professional, and it adds everything up for you. The ATO has warned that treating it as a ready made tax document, without a second look, is one of the most common ways rental property owners get their return wrong, and it is a mistake that can trigger a closer look at your entire return, not just the expense in question.

What the ATO is seeing

The ATO has identified a consistent pattern of issues in how rental expenses from property manager statements end up in tax returns:

• Capital expenses, including initial repairs made soon after buying a property, being claimed as an immediate deduction instead of over time.
• Expenses grouped together under vague labels, without enough detail to work out how they should be treated for tax purposes.
• Mismatches between when an expense was actually incurred and when it was paid, which affects which financial year it belongs in.
• Private expenses, such as costs linked to the owner’s own use of the property, being included in the claim by mistake.

Repairs versus capital expenses

Type	Example	How it’s usually claimed
Repair	Fixing a broken tap or a cracked window	Claimed straight away, in the year the cost was incurred
Capital improvement	Renovating a kitchen or replacing a whole fence	Claimed gradually over several years
Initial repair	Fixing a defect that already existed when you bought the property	Treated as capital, not an immediate deduction, even if it looks like an ordinary repair

 

Why the distinction matters more than it seems

Claiming a capital expense as an immediate repair does not just risk a small correction. It can prompt the ATO to look more closely at every other expense in your return, since it suggests your records may not be reliable more broadly.

This is especially common with larger repair jobs. If your property manager arranges a repair and pays for it out of the rent collected during the year, the amount they remit to you is already net of that cost. If you then separately claim the invoice they send you for your records, without checking whether it has already reduced the rental income you declared, you can end up claiming the same expense twice: once through a lower declared rental income, and again as a separate deduction.

Records worth keeping

Beyond comparing your statement to invoices at tax time, it is worth building a simple filing habit across the year rather than trying to reconstruct everything in a rush. Useful records include:

• original invoices for every repair, not just the property manager’s summary of them
• photos of any work carried out, particularly for larger jobs, which can help demonstrate whether something was a repair or an improvement
• a note of any period the property was used privately, even briefly, such as a stay between tenants
• bank statements showing rental income received, so it can be reconciled against what your property manager has reported

What to do before you lodge

1. Compare your property manager’s annual statement against the actual invoices, not just the summary figures.
2. Ask your property manager for a description of any expense listed as “sundry” or “other”.
3. Separate capital items and repairs before you hand your records over.
4. Flag anything related to personal use of the property, even short periods, so it can be apportioned correctly.
5. Bring both the statement and the underlying invoices to your appointment with JMB.

What happens if the ATO flags a mismatch

If the ATO’s data matching identifies a mismatch between what you have claimed and what its other data sources suggest, the usual first step is a request for more information, not an automatic penalty.

This is exactly why keeping the underlying invoices and records matters. A well documented claim, even one that turns out to need a small correction, is treated very differently to a claim with no supporting evidence behind it.

Why rental property is such a consistent ATO focus

Rental property expenses have been a persistent area of concern for the ATO for years, not just in this latest warning. Investment property is common, the rules around repairs, capital works and private use are genuinely more complex than most owners expect, and property manager statements, however well intentioned, are not designed with tax law in mind.

That combination makes rental property one of the more error prone areas of individual tax returns, and one the ATO consistently prioritises when deciding where to look closely.

If you think you may have already made a mistake

If you look back at a previous return and suspect an expense may have been classified incorrectly, the best course of action is generally to correct it voluntarily rather than wait to be contacted.

Coming forward before the ATO raises a query is treated far more favourably than being caught out through a data match, and in many cases the correction itself is straightforward once the right information is available. If this sounds like your situation, it is worth raising it with us directly rather than waiting until your next return is due.

Frequently asked questions

Q. Can I ask my property manager to fix the classification for me?

Property managers are not tax professionals, and their statements are prepared for cash flow purposes, not for tax law. It is worth bringing both the statement and the invoices to us so we can classify each expense correctly.

Q. What counts as an ‘initial repair’?

An initial repair is work that fixes a problem that already existed when you bought the property, even if you only discover it and fix it after settlement. The ATO treats these as capital expenses, not immediate deductions, because the cost is really part of what you paid to bring the property up to a rentable standard.

Q. Does this apply to holiday homes as well as standard rentals?

Yes, the same expense classification rules apply, on top of the specific rules about private use that apply to holiday homes. See our earlier article on holiday home deductions for more on that.

Sources

ATO, ATO warning to rental property owners: don’t let your tax return be a ‘fixer-upper’: https://www.ato.gov.au/media-centre/ato-warning-to-rental-property-owners-dont-let-your-tax-return-be-a-fixer-upper

Tax time has arrived for millions of Australians, and the ATO is better equipped than ever to detect errors in your return. With sophisticated data-matching technology and access to information from banks, digital platforms, share registries, and short-term accommodation services, the ATO can cross-reference your declared income and deductions against a wide range of third-party sources before your return is even processed.

This year, the ATO has issued a direct public warning: do not rely on unverified tax advice, particularly from artificial intelligence platforms, social media influencers, or informal tips from friends and family. Alongside that warning, the ATO has announced two specific focus areas for Tax Time 2026 that every Australian lodging a return should understand before submitting.

This blog explains exactly what the ATO has communicated publicly about its priorities this Tax Time, so you know what to check before you lodge your 2025/26 return.

The ATO’s Warning About Tax Misinformation

In April 2026, the ATO issued a public warning ahead of Tax Time, alerting Australians to the growing spread of inaccurate tax information online. ATO Assistant Commissioner Anita Challen stated that taxpayers should pause and check their tax information before acting on it, particularly when that information comes from unofficial sources.

The ATO has identified three main sources of unreliable tax advice that Australian taxpayers are acting on this year.

Artificial Intelligence Platforms

AI tools have become widely accessible and many Australians are using them for quick answers to tax questions. The ATO acknowledges that AI can be useful in some contexts but has warned specifically that AI platforms can pull information from varied and sometimes unreliable sources. The result is guidance that may not reflect current Australian tax law or your individual circumstances.

The ATO’s message is clear: “Your tax return isn’t the place for guesswork.” Acting on AI-generated tax advice without verifying it against the ATO’s own resources, or consulting a registered tax professional, carries real compliance risk.

Finfluencers and Social Media Tax Tips

A growing number of Australians are turning to financial influencers, commonly known as finfluencers, for information about tax deductions, investment strategies, and side hustle income. The ATO has specifically called out this type of content as a source of misleading information this Tax Time.

The concern is that confident-sounding social media content about refund shortcuts, little-known deductions, or ways to minimise tax often oversimplifies the law or applies general rules to situations where specific conditions must be met. What worked for someone else’s return may not be available to you based on your own role, employer arrangements, and income type.

Informal Advice from Family and Friends

Well-meaning advice from colleagues or family members who always claim a particular deduction is another source of errors the ATO is flagging. Australian tax law is complex and highly circumstance-specific. A deduction that someone else claimed in a prior year may not be available to you in 2026, particularly given recent court decisions and updated ATO guidance that have clarified what employees can and cannot deduct.

The critical point is this: regardless of where your tax advice came from, you remain responsible for the accuracy of your return. As the ATO’s Assistant Commissioner stated: “Taxpayers remain accountable for ensuring the information they or their agents provide to the ATO is accurate, whether the advice came from a friend, online sources, or if AI tools were used in its preparation.”

Tip: Verify Before You Lodge

Before acting on any tax tip, verify it against the ATO’s official resources at ato.gov.au, the ATO app, or by consulting a registered tax professional.

ATO Focus Area 1: Work-Related Deductions

Work-related expenses are the ATO’s first primary focus area for Tax Time 2026. This is one of the largest categories of deductions claimed by Australian individuals and one of the most frequently misunderstood.

To claim a work-related deduction, three conditions must all be met:

• You must have spent the money yourself and not been reimbursed by your employer
• The expense must be directly related to earning your income from work
• You must have a record such as a receipt or invoice to substantiate the claim (for claims over $300)

The ATO has highlighted two types of errors it is seeing this year: deductions that are overclaimed and expenses that have not been correctly apportioned between work and private use.

Understanding Apportionment

Apportionment is required whenever an expense has both a work-related and a private component. You can only claim the work-related portion, not the full amount of the expense.

Common examples where apportionment applies include:

• A mobile phone used for both personal calls and work calls: only the work-related percentage of the bill is deductible
• A laptop or computer used for work tasks and personal browsing: only the work-use percentage of its cost or depreciation is deductible
• A home internet connection used for both work and personal purposes: only the work-related proportion is claimable
• A car used for both work-related travel and private trips: only the kilometres driven for work purposes can be claimed

The ATO’s message this year is direct: claiming the full cost of a mixed-use expense, or rounding up the work-use percentage to a convenient number without proper records to support it, is one of the specific errors being identified in compliance reviews.

Common Work-Related Deduction Mistakes to Avoid

The ATO publishes occupation and industry specific guides setting out exactly which deductions are available for different roles. Checking the guide for your occupation before lodging is one of the most practical steps you can take, both to ensure you are claiming everything you are entitled to and to avoid claiming deductions that do not apply to your role.

Common errors in work-related deduction claims include:

• Claiming expenses that were reimbursed by your employer
• Claiming the cost of travelling between home and your regular workplace (this is a private expense, not a work deduction)
• Claiming clothing that could be worn outside of work, even if you only wear it for work
• Claiming tools, equipment, or subscriptions that are primarily for personal use
• Failing to keep receipts for individual claims over $300

Did You Know?

The ATO’s occupation guides cover hundreds of roles, from teachers and nurses to tradies and IT professionals. You may be entitled to deductions specific to your occupation that you have not claimed before. Visit the ATO occupation and industry guides page to find the guide relevant to your work.

ATO Focus Area 2: Omitted Income

Omitted income is the ATO’s second primary focus area for Tax Time 2026. This covers income that taxpayers have not declared, whether because they were unaware of the obligation to report it or because they believed it would not be detected.

The ATO’s data-matching capabilities have expanded significantly. Under the Sharing Economy Reporting Regime, digital platforms that facilitate income-earning activities are required to report payment data directly to the ATO. This information is automatically cross-referenced against lodged returns. The ATO is clear: if income has not been declared but the ATO has received it from a third party, taxpayers can expect an amended assessment.

Side Hustle and Gig Economy Income

Millions of Australians earn income through digital platforms and gig economy work in addition to their primary employment. Whether you drive for a ride-sharing service, deliver food, sell goods through an online marketplace, rent out a property through a short-term accommodation platform, or provide services through a task-based platform, that income is assessable and must be declared.

Platform operators are required to report payment data to the ATO under the Sharing Economy Reporting Regime. This means income received through ride-sharing, delivery, accommodation, and marketplace platforms is already visible to the ATO before you lodge. You can read about your obligations on the ATO’s sharing economy income page.

Cash Jobs

Income earned through cash jobs is fully assessable and must be included in your tax return regardless of whether a formal invoice was issued or payment was through a bank account. The ATO uses bank deposit data, industry benchmarking, and lifestyle analysis to identify taxpayers whose declared income appears inconsistent with their actual financial activity.

Cash income is not invisible income. If you provide services, complete work, or sell goods and receive payment in cash, that income is taxable and must be declared in your return.

Rental Income

Rental income from investment properties is fully assessable and must be declared for every dollar received. This includes short-term rental income from digital accommodation platforms. The ATO is focusing not only on whether rental income is declared but also on whether associated deductions have been correctly calculated and apportioned.

If your rental property also doubles as a holiday home that you use personally during parts of the year, the ATO has released significant new guidance in May 2026 that directly affects what you can and cannot claim. A separate blog on our website covers this new guidance in full detail.

Important: The $1,000 Standard Deduction Does Not Apply to This Year’s Return

The government’s proposed $1,000 standard deduction for work-related expenses was announced in the 2026/27 Federal Budget but applies from 1 July 2026. This means it will be available when you lodge your 2026/27 return next year. It does not apply to the 2025/26 return you are lodging now. Claims for this financial year continue to be assessed under the existing substantiation rules.

How to Check Your Return Before You Lodge

Before lodging your 2025/26 tax return, work through the following steps to reduce the risk of errors and ATO scrutiny:

• Gather documentation for all income sources, including salary, investment income, side hustle platform income, rental income, and any cash payments received
• Review your work-related deduction claims against the ATO’s occupation and industry guide for your role
• For any expense with both work and private components, calculate the work-related proportion and claim only that amount
• Confirm you have receipts and records for all individual deductions over $300
• Check your pre-fill data in myTax to cross-reference the information the ATO already holds about your income from employers, banks, and platforms
• Verify that all employer superannuation contributions are showing in your super fund, particularly as Payday Super begins from 1 July 2026

If you are uncertain about any deduction or income item, the ATO’s Tax Time 2026 guidance is the most reliable starting point.

Why a Registered Tax Agent Is Your Safest Option

A registered tax agent is legally authorised to prepare returns and provide tax advice on your behalf. Registered agents are bound by the Tax Practitioners Board’s Code of Professional Conduct and must maintain current knowledge of Australian tax law. This is a materially different standard from an AI tool, a social media post, or informal advice.

Using a registered tax agent also provides practical advantages at Tax Time:

• Extended lodgment deadlines beyond the standard 31 October deadline for self-lodgment
• Professional accountability for advice given, meaning you have recourse if incorrect advice causes a problem
• Knowledge of occupation-specific deductions, recent ATO rulings, and court decisions that affect what can and cannot be claimed in your specific situation
• Representation support and a professional intermediary if the ATO raises a query or audit

At JMB Consultants, we provide personalised tax return preparation and advice for individuals across Australia. If you would like assistance with your 2025/26 return, contact us before lodging. To find any registered tax agent, use the Tax Practitioners Board agent search.

Official Resources

The following ATO publications and tools are directly relevant to Tax Time 2026:

• ATO Tax Time 2026
• ATO Work-Related Deductions Guide
• ATO Occupation and Industry Specific Guides
• ATO Sharing Economy Income
• ATO myTax: Lodge Your Return Online
• Tax Practitioners Board: Find a Registered Tax Agent

Disclaimer: This article is intended as general information only and does not constitute legal or financial advice. The information is based on ATO guidance and public statements current as at June 2026. Tax rules and ATO priorities can change. You should seek professional advice tailored to your specific circumstances before lodging your return or taking any action.

If you own a property that doubles as a holiday home, the Australian Taxation Office has released significant new guidance that directly affects what you can and cannot claim as a tax deduction. The updated guidance, finalised on 20 May 2026, draws a clear and important distinction between properties that are genuinely operated to produce income and properties that are primarily held for personal holidays or recreation.

This distinction matters because it determines whether most property-related expenses such as interest, council rates, body corporate fees, and depreciation are deductible at all. Under the new guidance, a property classified as a leisure facility rather than an income-producing asset may have most of its deductions denied, even if it generates some rental income during the year.

This blog explains the new guidance in plain terms, including what has changed, how the ATO applies its primary purpose test, what you can and cannot claim, how apportionment works, and what record keeping is required from 1 July 2026.

What Has Changed: The New ATO Guidance

On 20 May 2026, the ATO released three new documents that update and clarify how it assesses rental property income and deductions, with a particular focus on properties that are also used as holiday homes.

The three documents are:

• TR 2026/1 (Taxation Ruling): Sets out the ATO’s views on when income from the use of a rental property is assessable and when expenses can be claimed as deductions. This ruling applies retrospectively and replaces earlier ATO guidance on rental properties.
• PCG 2026/2 (Practical Compliance Guideline): Explains how to determine whether a property is being used to produce assessable income on commercial terms, and how to apportion deductions between income-producing and non-income-producing periods.
• PCG 2026/3 (Practical Compliance Guideline): Sets out the ATO’s compliance approach for holiday homes, including the specific risk indicators the ATO will assess when reviewing deduction claims for mixed-use properties.

The ATO’s overview of this new guidance is available on the ATO rental property newsroom page. This guidance is particularly important for owners of properties at the coast, in alpine regions, or in other holiday destinations who rent their property through short-term accommodation platforms or traditional holiday rental agencies.

Who Does This Guidance Affect?

This guidance applies to any residential property owner who uses their property personally for some part of the year and rents it out for the remainder. It covers short-term accommodation through digital platforms such as Airbnb and Stayz, traditional holiday rental arrangements, and any mixed-use property where there is both personal use and rental income.

The Primary Purpose Test

The central question under the new guidance is whether your property is primarily held to generate assessable income, or primarily held for your own holidays and recreation.

The ATO now applies a three-step approach when assessing income and deductions for rental properties that may also be used as holiday homes:

• Step 1: Is the property being used to produce assessable income?
• Step 2: Is this property a holiday home under the ATO’s definition?
• Step 3: What deductions can be claimed, and how should they be apportioned?

A property is treated as a holiday home if it is used, or held for use, for your holidays or recreation, or the holidays or recreation of your family members or friends, at no charge or at a reduced rate.

The primary purpose question is not simply answered by counting how many days the property was rented versus how many days you stayed there. The ATO looks at the overall pattern of use, how the property is advertised, the rates charged, whether you actively pursue bookings during high-demand periods, and whether you are genuinely maximising rental income or primarily treating the property as a personal asset that earns incidental income.

When Deductions Are Denied: The Leisure Facility Classification

If the ATO determines that your property is not used primarily to earn assessable income, it may be classified as a leisure facility. Under this classification, the majority of property-related deductions are not available.

The following types of expenses are denied for a property classified as a leisure facility:

• Interest on the loan used to acquire or improve the property
• Council rates and water rates
• Body corporate fees and levies
• Capital works deductions (the building write-off)
• Decline in value of furniture, appliances, and fittings inside the property
• General maintenance and repair expenses
• Insurance premiums for the property

This represents a significant change for property owners who have historically claimed a proportion of these expenses based on the number of days the property was available for rent. Under the new guidance, availability alone is no longer sufficient if the ATO’s overall assessment is that the primary purpose of holding the property is personal use.

What You Can Always Claim

Regardless of how the property’s primary purpose is assessed, certain direct rental-related expenses remain deductible whenever the property is actually occupied by paying guests. These expenses have an exclusive and direct connection to the rental activity itself and are not denied even when broader deductions are restricted.

Expenses that are always deductible when the property is actually rented out include:

• Advertising costs incurred to find guests or tenants, including platform listing fees
• Cleaning costs incurred after a guest stay
• Booking fees and commissions paid to platforms or rental agencies
• Linen costs incurred specifically for guest use
• Any other costs that arise directly from and only from a specific rental period

These direct rental expenses remain available because they have no private use component. They are incurred as a direct result of the rental activity and would not be incurred at all if the property were not being rented.

When Partial Deductions Apply: The Apportionment Rules

If your property is mainly used to produce income but has a small amount of private use, such as a week or a few weekends during the off-season where there was no booking or a very low prospect of one, you may still be able to claim a deduction. However, expenses must be apportioned and you cannot claim for any period of private use.

The ATO’s guidance makes an important distinction about what counts as private use. A period when your property was genuinely available for rent but simply had no bookings does not automatically count as private use. The key factors are whether the property was available on genuine commercial terms during that period, meaning:

• It was advertised in ways that gave it broad exposure to potential guests
• The rental rate was comparable to similar properties in the area
• Booking requests were actively monitored and responded to
• You did not turn away bookings to preserve the property for personal use

By contrast, periods when you or your family used the property personally, or when access was blocked or reserved for personal use regardless of whether you actually stayed there, are private use periods and must be excluded from any deduction calculation.

How Apportionment Is Calculated in Practice

When apportionment is required, eligible expenses are divided between deductible periods and non-deductible periods. The deductible periods are those when the property was either occupied by paying guests or genuinely available for rent on commercial terms.

A straightforward example of how this works:

• Property available for rent on commercial terms: 46 weeks of the year
• Property used privately by the owner or family: 6 weeks of the year
• Apportioned deduction available: 46/52 of eligible expenses

Note that periods when the property was nominally available but where bookings were restricted, declined, or blocked for personal access purposes are not treated as available for rent. The ATO will look at the actual pattern of use and availability, not just what was stated in advertising.

Risk Indicators the ATO Looks For

PCG 2026/3 sets out the specific factors the ATO will assess when determining whether a holiday home is genuinely income-producing or primarily a leisure asset. The full document is available on the ATO’s legal database. Property owners whose arrangements show the following characteristics face a higher risk of deductions being reviewed and denied:

• Blocking out periods of peak rental demand such as school holidays, Easter, and peak summer or winter seasons for personal use
• Charging family members or friends below-market rates for use of the property
• Limited advertising, or advertising that does not genuinely expose the property to paying guests
• Rental rates that are significantly below comparable properties in the same area and location
• Declining or not responding to booking enquiries in order to preserve the property for personal use
• Significant personal storage, permanently reserved rooms, or other arrangements that reduce the property’s availability as a rental

Properties that do not show these characteristics, where the owner actively maximises the commercial return and only uses the property personally during genuine off-peak periods when there is no realistic prospect of a booking, are in a stronger position to claim the full range of available deductions.

The Transitional Period: What This Means for Your 2025/26 Return

The ATO has confirmed a transitional compliance approach. It will not apply compliance resources to review deduction claims for holiday homes incurred before 1 July 2026, where the property arrangements were in place before 12 November 2025.

This means the 2025/26 income year may be the last year in which existing arrangements are protected from review under the new guidance. For the 2025/26 return covering expenses between 1 July 2025 and 30 June 2026, existing arrangements entered into before November 2025 are generally protected by the transitional approach.

From 1 July 2026, the new guidance applies fully without the transitional protection. Property owners who have been claiming interest, rates, and other property expenses under arrangements that PCG 2026/3 would place in the higher-risk category should review those arrangements before the new financial year begins and before lodging their 2025/26 return.

Record Keeping Requirements

Under the new guidance, property owners who wish to claim deductions for holiday homes must be able to demonstrate the income-producing nature of the property with documentary evidence. Good record keeping is your primary protection in the event of an ATO review.

The records you should maintain include:

• A complete log of all periods when the property was occupied by paying guests, including dates, nightly rates, and total income received
• A log of all periods of personal use, including dates, who used the property, and any charge applied
• Evidence of active marketing during periods the property was available, such as platform listing screenshots, booking portal histories, or communications with rental agents
• Records confirming the rental rates offered were comparable to similar properties in the area
• Receipts and invoices for all expenses claimed as deductions
• Platform booking histories and payout statements for all income received through digital platforms

The ATO’s new guidance specifically looks at whether the property was available on commercial terms and whether your records support that assessment. Without contemporaneous records, it is very difficult to defend deduction claims if the ATO raises a question about your property’s primary purpose.

Official Resources

The following ATO publications and pages are directly relevant to the new holiday home guidance:

• ATO: New Guidance for Rental Property Owners (Newsroom)
• TR 2026/1: Taxation Ruling on Rental Property Income and Deductions
• PCG 2026/3: ATO Compliance Approach for Holiday Homes
• ATO: Residential Rental Properties
• ATO: Rental Expenses You Can Claim

Disclaimer: This article is intended as general information only and does not constitute legal or financial advice. The information is based on ATO guidance including TR 2026/1, PCG 2026/2, and PCG 2026/3 as finalised on 20 May 2026. Tax rules and ATO guidance can change, and individual circumstances vary. You should seek professional advice tailored to your specific situation before lodging your return or adjusting your rental property arrangements.