iscover Holiday home draft tax ruling needs clarification, CA ANZ says
TaxCA ANZ has said that the new holiday home tax draft ruling, TR2025/D1, needs high and wide education and a prospective and equitable transition approach.
From 1 July 2026, this new ruling proposes to declare holiday homes that are “mainly” used for personal purposes as “leisure facilities”, making expenses related to ownership and the personal use of the holiday home, such as mortgage interest rates, insurance, council rates, maintenance, and other holding costs, non-deductible.
As reported by Accountants Daily, the body urged holiday-home owners to brace for these tax changes as to be eligible for deduction claims, holiday-home owners must prove that their property has “mainly” been used for income generation purposes.
Susan Franks (pictured), tax leader at CA ANZ, called the draft ruling a significant change in approach by the ATO.
“Many tax practitioners have spent decades managing the tax affairs of their clients’ holiday homes based on the ATO’s guidance, case law and rulings,” Franks said in a letter to the ATO.
“There will need to be a very widely and highly publicised campaign about this change of approach to ensure that tax practitioners and taxpayers are not caught unawares.”
“The draft guidance on holiday homes provides a list of criteria for taxpayers to consider, yet most examples focus on the use of the home during peak periods. To provide greater guidance to taxpayers and help reduce compliance costs, consideration could be given to providing bright-line tests.”
In its submissions, CA ANZ stressed that greater certainty about the meaning of the word “mainly” was required. It called for clarity improvements to ensure that the final guidance was more practical for members and their clients.
It emphasised that the draft guidance must provide better support to taxpayers in understanding and applying the rules around holiday home deductions and compliance.
Complexity and compliance burden
The body raised concerns about the complexity and potential compliance burden that the draft guidance may create, and called for the need to provide bright-line tests to help taxpayers and for compliance cost reductions.
For CA ANZ, the scale of change from the longstanding IT 2167 approach revealed the need for education to reach a broad audience. The body stressed that accessible information must be provided to support compliance and avoid confusion for individuals who are not tax specialists or do not have a tax agent.
A prospective and fair approach
The body also recommended that the ATO be fair and prospective in the transition and that retrospective application of the rules would disadvantage taxpayers who relied on previous guidance, as they could notchange their past actions.
It recommended that changes be applied from 1 July 2026 to give advisers and taxpayers time to adjust their record-keeping and practices.
Further, the body recommended that the ATO publish a comprehensive list of non-ownership expenses that were not subject to section 26-50.
It said that this would provide greater certainty about claimable expenses and reduce the risk of errors.
Carlos Tse
Carlos Tse is a graduate journalist writing for Accountants Daily, HR Leader, Lawyers Weekly.
