Short-Term Rental and Airbnb Tax Deductions: Expenses You Can Claim for Airbnb Property in 2025

We’ve been receiving many enquiries from property owners who rent out their homes or holiday units on platforms such as Airbnb and Stayz. The most common question is: what deductions can you claim for short-term rental income — and what can’t you? Many also want to know how tax applies when they occupy the property themselves for part of the year. The rules can be tricky but understanding them is crucial to maximise deductions.

The rise of short-term rentals has opened new opportunities for Australians to generate extra income. But it has also created more complex tax reporting requirements. Claiming the right deductions — and only those you’re entitled to — is essential to stay compliant and maximise your return.

Understanding Short-Term Rental Income

If you rent out a property or a room through a short-term accommodation platform, any amount you receive is generally considered assessable income. This includes nightly fees, cleaning charges, and any service or booking fees paid by guests. The ATO treats this the same way as other rental income — meaning you must declare it in your annual tax return.

You can also claim a proportion of the expenses you incur in earning that income. However, your deductions must be directly connected to the period or part of the property that is available for rent.

When the Property Is Rented for Part of the Year

If your property is only available for rent for part of the year — for instance, when you use it personally during holidays — you can only claim expenses for the period it is rented out or genuinely available for rent. For example, if your beach house is rented for 120 days in a financial year, you can claim 120 days’ worth of eligible expenses, such as interest, rates, and cleaning.

The ATO is clear that a property is only considered “genuinely available for rent” when it is advertised widely, at reasonable market rates, and accessible to potential tenants. If you block out weekends for personal use or set unreasonably high rates, deductions may be limited.

Renting Out Part of Your Home

If you rent out a single room or a section of your home, you can claim a portion of expenses based on the area rented and the number of days it’s available. For instance, if you rent out one bedroom representing 20% of your home’s floor area for half of the year, you can claim 10% (20% × 50%) of eligible annual expenses such as electricity, interest, and insurance.

Remember, if you use the same property as your main residence, you may lose part of your main residence exemption for capital gains tax when you eventually sell it. The portion used to produce income will generally be subject to CGT.

Deductible Expenses for Short-Term Rentals (Airbnb)

Short-term rental owners can claim a wide range of deductions, provided they relate to the income-producing portion of the property. Common deductible expenses include:

• Interest on loans used to purchase or improve the property
• Council rates and water charges
• Electricity, gas, and internet costs (apportioned if partly private)
• Repairs and maintenance related to guest use
• Cleaning, laundry, and linen replacement
• Depreciation on furniture, appliances, and fittings
• Advertising fees and listing platform charges
• Property management or host service fees
• Land Tax 
• Insurance premiums (building, contents, and landlord insurance)

For capital works — such as building improvements, extensions, or structural renovations — deductions are generally spread over 40 years at 2.5% per annum.

Apportioning Expenses for Mixed Use

Consider a family that owns a holiday home in Margaret River. They use it themselves for six months each year and rent it out on Airbnb for the other six months. The property’s total annual expenses amount to $30,000, including interest, rates, cleaning, and utilities. The deductible portion would generally be 50%, or $15,000, reflecting the half-year rental use.

If the owners also occupy part of the house while renting another portion to guests, a further adjustment is required. The deductible percentage would be based on both time and area rented — for example, 30% of the total if guests occupy that much of the property during half the year.

Expenses You Cannot Claim

You cannot claim deductions for:

• Expenses that are purely private or relate to your personal use
• Costs of buying or selling the property, such as stamp duty or conveyancing
• Expenses incurred while the property was not genuinely available for rent
• Borrowing costs related to private portions of a loan
• Renovations or improvements that increase the property’s value beyond normal maintenance (these are capital in nature)

The ATO closely monitors Airbnb and other platforms, using data-matching programs to ensure property owners correctly report both income and expenses. Claims that are excessive or unrelated to rental activity often attract scrutiny.

Depreciation and Assets in Short-Term Rentals

Owners of short-term accommodation can claim depreciation on eligible assets, such as furniture, whitegoods, and electronic appliances, that are used to earn income. However, if the property was previously used for private purposes, deductions on second-hand items may be restricted under recent tax changes. To ensure accuracy, it’s best to engage a qualified quantity surveyor to prepare a depreciation schedule that distinguishes between depreciable assets and capital works.

Keeping Records and Staying ATO-Compliant

Keeping detailed records is essential. You should maintain:

• Rental agreements or booking confirmations
• Receipts and invoices for all expenses
• Bank statements showing rental income and costs
• Utility bills and rate notices
• Property-use calendars showing when the property was rented or privately used

Without evidence, the ATO may disallow deductions even if the property was genuinely used for income production. Digital tools like expense-tracking apps and booking calendars can make compliance easier and support accurate record-keeping.

GST and Short-Term Rental Income

Most individuals who rent out property through Airbnb or similar platforms are not required to register for GST because residential rent is generally input-taxed. However, GST can apply if the property qualifies as commercial residential premises — such as a hotel, motel, or serviced apartment — and the operator runs it like a business. In that case, GST would be payable on rent received, and input tax credits could be claimed for expenses.

It’s important to assess whether your activity meets the threshold of being “carrying on a business.” The ATO considers factors such as the scale of operations, intention to profit, and level of organisation.

Capital Gains Tax When You Sell a Short-Term Rental Property

When you sell a property that has been used to earn short-term rental income, part of any capital gain may be taxable. The portion that relates to income-producing use is not eligible for the main residence exemption. The gain is usually apportioned based on both time and floor area used for rental purposes. If you’ve claimed depreciation on the property, the amount of depreciation previously deducted will also reduce your cost base and increase the taxable gain.

What’s next

If you’re running a short-term rental or listing your home on Airbnb, it’s important to understand which deductions apply and how to apportion your expenses correctly. At Investax, we help property owners and investors identify legitimate deductions, assess their CGT exposure, and keep their records in line with ATO expectations. If you’re a business owner offering staff accommodation or managing multiple properties, we can also help you understand your tax obligations and structure the ownership efficiently.

An accounting fee paid to a good accountant should be seen as an investment, not a cost. Especially when that fee is 100% tax-deductible, it makes sense to work with someone who understands the complexity of short-term rental tax. If your current accountant isn’t experienced in property matters, maybe it’s time to give Investax a go.

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