Holiday Home Tax Changes: How New ATO Rules Impact Your Loan Strategy | Bear Loans

If you're thinking about buying a holiday home or already own one, there’s a major tax change coming that every property owner needs to understand. The Australian Taxation Office (ATO) has released new draft guidance that could significantly impact the deductions you can claim and the true after-tax cost of owning a holiday property.

But here’s the part most people miss:

Tax changes like this don’t just affect your tax return they affect your lending, loan structure, cashflow, and borrowing capacity.

This is why choosing the right mortgage broker matters. And it’s why Bear Loans is different: we’re mortgage brokers who are also Chartered Accountants, so we help you structure both your loans and your investments with tax liabilities in mind.

Let’s break down what’s changing and why it directly affects your loan strategy.

Holiday Homes May Now Be Treated as “Leisure Facilities”

Under the ATO’s new draft views, some holiday homes may now be classified as leisure facilities. If this happens, owners may no longer be able to deduct major expenses such as:

• interest

• council rates

• insurance

• cleaning and maintenance

• utilities

• repairs

These deductions are only available if the property is mainly used to produce rental income.

How Holiday Home Tax Changes Affect Your Loan Strategy

If interest becomes non-deductible, your after-tax cost increases, which can:

• affect borrowing capacity

• reduce cashflow

• make your loan structure less effective

• impact your long-term investment strategy

This is exactly where a tax-informed mortgage strategy becomes essential.

How the ATO Decides If Your Property Is “Mainly” for Income

The ATO is no longer focused on how many days the property was technically “available” for rent. Instead, they’re looking at practical behaviour, including:

• whether the property is genuinely available in peak season

• whether rental rates are realistic

• whether genuine effort is made to attract guests

• whether the owner blocks out profitable periods for private use

• whether the location has known peak periods

If your property appears more like a private retreat than a commercial operation, deductions may be denied.

Loan impact:

• taxable income may increase

• borrowing capacity may drop

• cashflow may tighten

• refinancing options may shift

This is where Bear Loans’ combined mortgage + accounting skillset keeps your strategy aligned.

ATO Compliance Red Flags

Additional indicators the ATO will use include:

• excessive personal use

• restrictive rental conditions

• long vacancies during peak demand

• limited ads or poor listing engagement

• unrealistic pricing

Any of these could trigger denied deductions or further review.

From a lending perspective, denied deductions may increase your taxable income and change what banks will lend you.

Transitional Relief Gives Owners Time to Adjust

The ATO won’t apply section 26-50 to expenses:

• incurred before 1 July 2026, and

• relating to arrangements entered before 12 November 2025.

This gives owners time to:

• review private vs rental use

• adjust pricing and advertising

• reconsider loan structure and cashflow strategies

• ensure your lending approach matches your tax outcome

This window is the perfect time to rethink your strategy with a broker who understands the tax side.

What This Means for Owners and Buyers

Holiday homes remain strong investment options but only if your loan, tax position and rental strategy work together.

If the ATO considers your property a leisure facility, your deductions could disappear, which may:

• increase tax

• reduce annual cashflow

• affect borrowing power

• change whether the property remains viable

This is why your mortgage broker must understand tax.

Why Choose Bear Loans for Holiday Home Lending

Most brokers will compare rates. But at Bear Loans, we go further:

• We assess whether your loan is tax-effective.

• We identify how loan structure affects deductions.

• We help you manage cashflow around non-deductible interest.

• We assess investment risks from both a lending and tax perspective.

• We help you proactively plan for ATO rule changes like this.

With Bear Loans, you get mortgage brokers backed by Chartered Accountants, the ideal combination when tax rules affect loan strategy.

What You Should Do Next

If you own or plan to buy a holiday home, now is

the time to review:

• rental vs private use

• peak-season availability

• pricing and advertising strategy

• loan structure & offsets

• interest-only vs principal & interest

• borrowing capacity in light of new rules

Our team can help you navigate both your loan and your tax liabilities so you make informed decisions before these rules take effect.

Book a Loan Strategy Review

If you want a loan strategy that considers tax liabilities not just interest rates speak with Gavin at Bear Loans. He is a Chartered Accountant with over 25 years experience and has been a mortgage broker for 10 years.

He will help you:

• understand the ATO changes

• protect your deductions

• structure your loan tax-effectively

• plan for long-term investment success

  
  

Book a chat with Bear Loans today and make smarter decisions with expert accounting and lending guidance.

Click here to Call Gavin