The Ultimate 2025 Guide to Property Tax Returns for Airbnb & Holiday Rental Investors‍

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Quick takeaway:

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• The ATO is monitoring Airbnb and holiday rental income more closely than ever, using advanced data matching from over 600 sources - including direct feeds from Airbnb and Stayz since July 2024. Declare every cent of income, including cleaning fees and reimbursements.
• Utilities, guest amenities (like tea, coffee, and toiletries), cleaning, gardening, repairs, council rates, insurance, and property management fees are all deductible - but only for the period the property is genuinely available for rent.
• Interest on loans and borrowing costs can be claimed, but only for the portion relating to rental use. Borrowing expenses are usually spread over five years.
• Repairs are immediately deductible. Improvements or renovations must be claimed over time as capital works deductions.
• Depreciation is often overlooked - claim on new furniture, appliances, and eligible renovations. Instant asset write-off is still available for assets under $20,000 until 30 June 2025.
• Expenses must be apportioned if you use the property for personal holidays - claim only for the days it was rented or genuinely available for rent.
• Keep detailed records and receipts for at least five years. Most individuals can amend their tax return for up to two years after assessment.
• Use smart tools (like TaxTank) to automate compliance and reduce audit risk. Always consult a qualified tax advisor for tailored advice.

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Featuring Key Insights and Examples from the MadeComfy x TaxTank Webinar

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If you own multiple investment properties - especially if you’re active in the Airbnb or holiday rental market,navigating your property tax return has never been more critical. The Australian Taxation Office (ATO) is watching property investors more closely than ever, and the rules for property, Airbnb, and holiday-rental tax returns are evolving fast. Our recent webinar with TaxTank, hosted by MadeComfy, brought together leading experts to unpack the latest ATO focus areas, common mistakes, and the best strategies to maximise your deductions and stay audit-proof in 2025.

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Why the ATO Is Watching: Data Matching, Airbnb, and Holiday Rentals?

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As highlighted in the webinar, the ATO’s data-matching capabilities are now incredibly advanced. They receive information from over 600 sources—including banks, utilities, property managers, insurers, and sharing economy platforms like Airbnb and Stayz. Since July 2024, these platforms must report host income and booking data quarterly, so the ATO can cross-check your declared income and deductions with actual activity.

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Example:

Sarah, a multi-property investor, thought her “occasional” Airbnb bookings would fly under the radar. But the ATO’s direct data feeds from Airbnb showed her true rental income, triggering an audit and penalties for underreporting. The message from the webinar is clear: declare every cent of rental income, including cleaning fees and reimbursements.

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The Main Areas of a Property Tax Return: What You Can (and Should) Claim

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The MadeComfy x TaxTank webinar broke down the key categories property owners must understand to maximise their property tax return, Airbnb tax return, and holiday-rental tax return.

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1. Utilities: Electricity, Gas, Water, Internet

For short-term rentals, owners usually pay all utilities. These are fully deductible for the period the property is genuinely available for rent. The ATO even uses utility data to verify occupancy periods and rental activity.

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Example:

Michael owns a Byron Bay holiday rental. He pays all the utility bills - electricity, water, and internet—to ensure guests have a seamless experience. At tax time, he claims these expenses in full for the days the property was available for rent.

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2. Amenities: Tea, Coffee, Toiletries, Flowers

Modern guests expect more than just a bed. Providing amenities like tea, coffee, milk, toiletries, and even fresh flowers is a deductible expense, as discussed in the webinar.

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Example:

Lisa, who manages two Airbnb properties, stocks each with premium teas, coffee pods, artisanal soaps, and fresh flowers for every new guest. She keeps all her receipts and claims these costs as part of her holiday-rental tax return, as they directly relate to attracting and retaining tenants.

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3. Cleaning, Gardening, and Maintenance

Regular cleaning between guests, garden upkeep, and general repairs are all immediately deductible. This is especially important for short-term rentals with high turnover.

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4. Council Rates, Body Corporate Fees, and Insurance

These ongoing costs are claimable for the period your property is rented or available for rent. If you only rent out your property part of the year, you must apportion these expenses accordingly.

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Example:

Priya’s apartment is available for holiday rental 200 days a year. She claims 200/365 of her annual council rates and insurance premiums on her tax return, reflecting the proportion of the year the property was income-producing.

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5. Interest on Loans and Borrowing Expenses

Interest paid on loans used to purchase or improve your rental property is deductible, but only for the portion used for the rental. Borrowing expenses like loan establishment fees can also be claimed, usually spread over five years.

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Example:

Sam refinances his investment loan and pays a $2,000 application fee. He claims $400 per year for five years as borrowing expenses.

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6. Repairs vs. Improvements

Repairs to restore the property to its original condition are immediately deductible. Improvements or renovations must be claimed over time as capital works deductions.

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Example:

After a guest damages a door, Emma pays for it to be fixed—this is a repair and fully deductible. Later, she renovates the kitchen, which is an improvement and must be depreciated over several years.

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7. Property Management and Platform Fees

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Fees paid to property managers, as well as platform commissions (like Airbnb’s service fee), are deductible expenses that directly reduce your taxable rental income.

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Depreciation: The Most Overlooked Tax Benefit

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The webinar made it clear: depreciation is one of the most powerful tools for property investors, yet it’s often misunderstood or missed entirely.

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What Can You Depreciate?

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Plant and Equipment (Airbnb Furniture/appliances): Items like air conditioners, carpets, appliances, and blinds can be depreciated over their effective life if they are new or installed after you purchase the property. For second-hand properties purchased after May 2017, you generally can’t claim depreciation on existing plant and equipment, but you can for new items you install.

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Capital Works: Construction costs and structural improvements (such as extensions, renovations, or a new roof) can be claimed at a rate of 2.5% per year over 40 years for properties built after 16 September 1987. For new build-to-rent developments, the rate has increased to 4% per year for eligible projects started after 9 May 2023, shortening the write-off period to 25 years.

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How Does Depreciation Work in Practice?

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Webinar Example:

Tom buys a new air conditioning unit for $3,000 and installs it in his Airbnb property. He can claim the decline in value of this asset each year over its effective life, as determined by the ATO. If Tom also recently renovated the bathroom, he can claim 2.5% of the renovation cost each year as a capital works deduction.

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Instant Asset Write-Off and Pooling

For small businesses and some property investors, the $20,000 instant asset write-off remains available until 30 June 2025. This means you can immediately deduct the full cost of eligible assets under $20,000 purchased and installed during the year. Assets over this threshold go into a depreciation pool, which is written off at higher rates in subsequent years.

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Tip from the Webinar:

Always keep your depreciation schedule up to date and consult a qualified quantity surveyor to ensure you’re claiming everything you’re entitled to—including new plant and equipment and all eligible capital works.

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Apportioning Expenses: Getting It Right

If you use your property for both personal and rental purposes, you must apportion your expenses. The ATO is clear: you can only claim deductions for the period the property is genuinely available for rent—not for your own holidays or vacant periods.

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Example:

Marie owns a beach house she rents out for 25 days a year and uses herself for 40 days. She receives $3,000 in rent and incurs $60,000 in expenses. Marie can only claim deductions for the 25 days the property was rented, not for her personal use or when the house sat empty.

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How Many Years Can You Amend Your Tax Return?

As discussed in the webinar, you can generally amend your tax return for up to two years after receiving your notice of assessment if you are an individual investor. For more complex structures (like trusts or companies), the amendment period may be four years. However, you must keep all records for five years from the date you lodge your return.

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If you missed the webinar or want to revisit the expert advice, watch the full session here: MadeComfy Webinar: Short-Term Rental Tax.

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The MadeComfy x TaxTank webinar provides invaluable insights into the ATO’s watchlist and how to maximise your short-term rental tax returns in 2025. With the ATO’s advanced data matching and AI tools, accurate reporting and recordkeeping have never been more critical. By understanding the key deductions - from utilities and guest amenities to depreciation and loan interest - and leveraging technology, you can confidently optimise your property tax return while minimising audit risk.

If you missed the webinar or want to revisit the expert advice, watch the full session here: MadeComfy Webinar: Short-Term Rental Tax.

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Disclaimer

The information provided in this blog is for general guidance and informational purposes only and does not constitute personal tax, legal, or financial advice. Tax laws and regulations change frequently and can vary based on your individual circumstances. Always consult a qualified tax advisor or financial professional before making decisions or lodging your tax return to ensure compliance with current Australian Taxation Office (ATO) requirements and to receive advice tailored to your situation.

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