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Each month we keep an eye on developments that could affect business owners, investors and individuals. February’s updates highlight a stronger compliance focus from the ATO, changes being considered for electric vehicle incentives, the risks of relying on AI for tax advice, and some important nuances around downsizer super contributions.
Below are the key issues to be aware of.
Holiday Homes Under the Microscope: What the ATO’s New Guidance Means
Many Australians use holiday homes in two ways — enjoying them with family while renting them out on platforms such as Airbnb or Stayz to offset costs. However, the ATO is signalling a much stricter approach to deductions for these properties.
Recent draft guidance suggests the ATO will increasingly distinguish between:
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Genuine investment properties, where the owner’s intention is to maximise rental income
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Lifestyle properties, where rental income is only incidental
If a property is considered primarily a holiday home rather than a commercial rental property, the ATO may deny deductions for expenses such as:
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Interest on the loan
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Council rates
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Land tax
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Repairs and maintenance
Instead, owners may only be able to claim limited direct costs such as advertising or cleaning.
What the ATO is Looking For
The ATO is particularly concerned about properties that:
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Are blocked out for private use during peak holiday periods
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Are advertised inconsistently or priced above market rates
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Generate tax losses year after year
With booking platform data now accessible to the ATO, inconsistencies between rental listings and tax returns are easier to identify.
What Property Owners Should Do
If you own a holiday property, it’s worth reviewing how the property is operated. Consider:
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Advertising the property consistently throughout the year
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Charging market-based rental rates
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Keeping records of bookings, advertising and private use
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Reviewing ownership structures and strategies where appropriate
The aim is to demonstrate that the property is genuinely held to produce rental income.
Electric Vehicle Tax Benefits Under Review
Electric vehicles (EVs) have become significantly more attractive for businesses due to tax incentives introduced in 2022.
One of the most valuable concessions is the Fringe Benefits Tax (FBT) exemption for eligible EVs provided to employees. Without this exemption, private use of a company vehicle can attract FBT of up to 47%.
Other benefits include:
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A higher luxury car tax threshold for fuel-efficient vehicles
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Possible reduced import costs
However, the Federal Government has now begun a formal review of the Electric Car Discount, largely because the program has been more popular (and costly) than originally expected.
While there are currently no immediate changes, businesses considering an EV purchase should review their plans carefully over the next 12–24 months.
For many organisations, EV salary packaging arrangements still deliver substantial tax and cash-flow savings.
AI Tax Advice: Helpful Tool or Costly Trap?
AI tools are becoming increasingly common for quick tax questions. While they can help explain basic concepts, relying on them for decisions can lead to costly mistakes.
The Australian tax system is complex and highly fact-specific. AI tools often:
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Provide incomplete or outdated information
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Suggest deductions that do not apply
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Misinterpret superannuation rules or contribution caps
In some cases, AI tools have even generated references to legal cases that do not exist. A recent tribunal decision highlighted the risk when a taxpayer relied on AI-generated case references that were incorrect.
The ATO has also warned that mistakes resulting from AI advice are still the taxpayer’s responsibility, meaning amended assessments, interest charges and penalties may apply.
AI can be useful for general education, but when it comes to tax decisions, professional advice remains essential.
Downsizer Contributions and the Family Home
For Australians aged 55 and over, selling a long-held family home may create an opportunity to boost superannuation through a downsizer contribution.
Key rules include:
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The property must have been owned for at least 10 years
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The contribution must be made within 90 days of settlement
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Up to $300,000 per person can be contributed
Importantly, the property does not need to be fully exempt from capital gains tax to qualify. Even if only part of the gain qualifies for the main residence exemption, the downsizer contribution may still be available.
However, once the funds are contributed to super, they are subject to standard preservation rules and generally cannot be accessed until retirement conditions are met.
Because the rules contain several technical nuances, it is important to review eligibility before proceeding.
Read more about all these topic in our Monthly Newsletter
Need Advice?
Tax rules and government incentives are constantly evolving, and small changes can have a significant financial impact.
If any of the issues above apply to you, whether it’s rental property deductions, EV purchases, super contributions or business structuring, our team at Strategic 360 is here to help.
Kerrily and Louise – Directors
