Section 26-50 ITAA 1997 Holiday Home Ownership/Repair Cost Non-deductibility – TR 2025/D1 and PCG 2025/D7 – November 2025
The Australian Taxation Office’s (“ATO”) 12 November 2025 release of TR 2025/D1 and PCG 2025/D7 confirm its intention to apply a longstanding, pre-existing non-deductibility provision originally introduced in 1974 (s.26-50 Income Tax Assessment Act (“ITAA”) 1997 – originally s.51AB ITAA 1936) to entirely deny deductions for some holiday home ownership, repair and similar costs (e.g. interest, rates, land tax and repairs). Such costs would ordinarily be deductible (at least in part) against assessable rental income received for the holiday home at times when it is not privately used. Section 26-50 ITAA 1997 applies to mixed-use (i.e. any private use + short stay/rental use) holiday homes which will meet the very broad s.26-50(2) ITAA 1997 definition of “leisure facility” (“Leisure Facility Holiday Homes”). Not every cost will fall within the section and there is an important exception in s.26-50(3) ITAA 1997 which MAY remove or reduce the non-deductibility problem in appropriate circumstances. However, in all cases a correct understanding and application of PCG 2025/D7 and the relevant law will be essential when assessing and documenting s.26-50 ITAA 1997 non-deduction risks (in most cases applicable from 2026/27 onwards but with potential immediate impact in some limited cases).