Chartered Accountants Australia and New Zealand (CA ANZ) has made a submission on the Australian Taxation Office’s (ATO) draft guidance on the deductibility of expenses and compliance expectations for holiday homes. In the submission, CA ANZ calls for improvements to ensure the final guidance is clearer and more practical for members and their clients. CA ANZ emphasises that the draft guidance—Taxation Ruling TR 2025/D1 and Practical Compliance Guidelines PCG 2025/D6 and PCG 2025/D7—should better support taxpayers in understanding and applying the rules around holiday home deductions and compliance.

Key concerns and recommendations

CA ANZ has raised concerns about the complexity and potential compliance burden the draft guidance may create. A major issue is the lack of clarity around the term ‘mainly’. The draft guidance also represents a significant change in the ATO’s 50-year old approach in how it applies section 26-50 of the Income Tax Assessment Act 1997 to limit tax deductions for holiday homes that have not been ‘mainly’ held to produce assessable income. While the draft guidance list criteria for taxpayers, most examples focus on peak period use. CA ANZ recommends that the final guidance define ‘mainly’ and consider bright line tests to help taxpayers and reduce compliance costs.

The change in approach and scale of this change means education must reach a broad audience. Individuals who are not tax specialists or do not use a tax agent will need clear, accessible information to support compliance and avoid confusion.

CA ANZ also urges the ATO to adopt a prospective and fair approach to the transition. Applying the new rules retrospectively would disadvantage taxpayers who relied on previous guidance and cannot change past actions. It would be preferable to apply the changes from 1 July 2026, giving advisers and taxpayers time to adjust their record-keeping and practices.

To further support taxpayers, CA ANZ recommends the ATO publish a comprehensive list of non-ownership expenses not subject to section 26-50. This would provide greater certainty about claimable expenses and reduce the risk of errors.

CA ANZ remains committed to working with the ATO to ensure the final guidance is clear, practical and fair for all stakeholders.