New ATO Rules for Rental Properties
What You Need to Know (2025 Update)
The ATO has released major new draft guidance that significantly tightens the rules around when rental property deductions can be claimed and what evidence landlords must keep to prove their property was genuinely available for rent.
TR 2025/D1
Income tax treatment for rental properties
PCG 2025/D6
ATO rental property risk zones (Green / Amber / Red)
PCG 2025/D7
Deductions denied during renovation, repairs and periods of unavailability
Why the ATO Has Changed the Rules
ATO systems and data-matching have identified widespread incorrect deduction claims, particularly for holiday homes used privately but claimed as rental properties and Airbnb/Stayz listings priced deliberately high to avoid actual bookings.
Holiday Home Abuse
Properties used privately but claimed as rental investments with full deductions
Pricing Manipulation
Listings priced unreasonably high to deter bookings whilst claiming deductions
Calendar Blocking
Peak seasons blocked for private use whilst claiming year-round rental status
Mates' Rates
Below-market pricing for friends and family claimed as legitimate rental income

The old guidance IT 2167 (1985) has been withdrawn, as it did not contemplate digital platforms or modern short-stay practices.
TR 2025/D1 – New Tests for "Genuine Availability"
TR 2025/D1 sets out strict, objective tests to determine whether a property is genuinely available for rent.
01
Advertising Requirements
Must be listed continuously on commercially recognised platforms (Airbnb, Stayz, major agents). Low-visibility or owner-controlled listings may not be accepted.
02
Pricing Requirements
Pricing must align with market comparables. ATO will review similar properties and seasonal pricing data. Overpricing to deter renters = not genuinely available.
03
Unreasonable Conditions
Restrictions can disqualify deductions: no children, excessive deposits, blocking peak season for private use, rejecting enquiries for non-commercial reasons.
04
Private Use Rules
Private use includes stays by owners, relatives or associates, mates' rates (below-market pricing), owner access during vacancies, any personal use breaks rental availability.
05
Vacancy Analysis
ATO examines whether enquiries were responded to, pricing was competitive, long vacancies match market conditions, and whether listing is suppressed due to poor pricing.
PCG 2025/D6 – ATO Risk Zones
The ATO will classify rental properties into three compliance zones.
Green Zone – Low Risk
Property listed all year, pricing is market-based, private use is minimal, all enquiries handled commercially, records are complete. ATO audit activity in this zone is minimal.
Amber Zone – Moderate Risk
Listings are intermittent, prices fluctuate inconsistently, private use occurs but is apportioned, some enquiries rejected without strong commercial reasons. The ATO may request documentation.
Red Zone – High Risk
Properties listed only in low season, blocking out peak periods, pricing set intentionally high, hidden private use disguised as vacancy, restrictions that prevent real renters. Audit likelihood is high and deductions are often denied.
PCG 2025/D7 – Renovations, Repairs & Unavailable Periods
PCG 2025/D7 clarifies that deductions are denied during periods the property is not "fit for occupation."
Deductions Denied During:
  • Construction
  • Major renovations
  • Mould, electrical, safety or structural issues
  • Unapproved extensions
  • Calendar blocking for private purposes
Examples:
Renovation from Jan–Aug → Interest and holding costs are not deductible
Storm damage repairs → Only the repair costs deductible, not holding costs
Peak-season blocking → Treated as private use
New Documentation Requirements
The ATO now requires significantly more detailed evidence. These are the documents the ATO is now requesting even for basic reviews.
1
Booking Calendar
Full booking calendar with date-stamped entries
2
Listing History
Listing history including screenshots
3
Enquiry Logs
Enquiry logs and responses
4
Pricing Comparison
Pricing comparison screenshots
5
Private Use Records
Records of all private use days
6
Agent Statements
Agent statements or platform analytics
7
Maintenance Records
Maintenance timelines and invoices
What This Means for Property Owners
You May Lose Deductions If:
  • The property is not genuinely available
  • Pricing is uncommercial
  • Listings are only seasonal
  • Mates' rates are used
  • Private use is significant
  • You cannot prove availability with records
You Must Now:
  • Document everything
  • Ensure pricing is competitive
  • Minimise private blocks
  • Maintain commercial-level responsiveness
  • Keep evidence for every vacancy period
  • Use full-year advertising unless a valid reason exists
How We Assist Our Clients
Our firm will help ensure you remain in the ATO's Green Zone by providing comprehensive rental property compliance services.
Listing Review
Reviewing your Airbnb/Stayz listings and checking pricing against current market data
Private Use Assessment
Assessing your private-use apportionment and preparing day-by-day deduction schedules
Evidence Pack
Building an ATO-ready "evidence pack" before lodging your tax return
Strategic Advice
Advising you on how to structure property use to maintain deductibility

If you would like a rental property health check or want us to prepare your ATO evidence pack, please contact us at [email protected] or (02) 9055 1330.