AXXO Accounting & Management

A warning for those who have residential rental properties

For the upcoming 2026 tax time, the Australian Taxation Office (ATO) is intensifying its investor crackdown by using advanced data-matching technology to cross-reference bank accounts, property records, residential investment loan data and booking platforms.
The government has allocated nearly 90 million dollars for this.

THE ATO WILL BE CHECKING

Holiday Homes & Short-Stays
Under the new 2026 guidelines, the ATO is classifying properties as "leisure facilities" if private use is prioritised over genuine commercial rental.
Blocking out peak periods (like school holidays) or restricting bookings will lead to the denial of all holding deductions (e.g., interest, council rates). Strict compliance rules take full effect from 1 July 2026.
This is a huge interpretation change denying otherwise a portion of the expenses.

Omitted Rental Income
Landlords must declare all gross rental revenue, including cash payments and booking fees.

Inflated Deductions
The ATO is flagging properties that claim full-year deductions when they are only available part-time, mix borrowing costs with personal loans, and have incorrect expense splits among co-owners.

Repairs vs. Capital Improvements
Immediate deductions for initial repairs or renovations on newly acquired properties are being blocked, these must be claimed over time as capital works.

I did an AI overview of the detrimental and unfair effects of the new 30% on trusts, and this is what came up:

Hits low-income beneficiaries hardest

Under the proposed measure, a discretionary trust with net taxable income of just $15,000 would be subject to the 30% tax, whereas an individual earning the same income would fall below the tax-free threshold and pay no income tax at all. This is a fundamental inequity baked into the design.

Lost credits for those on lower tax rates

If a beneficiary's personal tax rate is below 30%, the excess credit will simply be lost — it is non-refundable. This means families distributing to children, students, or low-income members are penalised without any mechanism to recover the overpaid tax.

Double taxation via corporate beneficiaries

Corporate beneficiaries will not receive a credit for the tax paid by the trustee, which appears deliberately designed to result in double taxation to discourage their use.

Disproportionate impact on small Small Business Development Corporation WA
Around 350,000 active small businesses currently operate under discretionary trusts. Many have used this structure for legitimate reasons like succession planning and asset protection — not tax avoidance — and now face costly restructuring.

Restructuring costs and state-level complications

While rollover relief provides some transitional support from an income tax perspective, taxpayers may face material transactional costs — particularly around stamp duty at the state and territory level — that inhibit efficient restructuring if relief is not coordinated across all levels of government.

No grandfathering for existing structures

No grandfathering applies, meaning existing discretionary trust structures will be captured from 1 July 2028 — giving families and businesses limited time to adapt arrangements that may have been in place for decades.

In short, while the government frames this as a fairness measure, critics argue it is a blunt instrument that punishes ordinary families and small businesses alongside genuine high-wealth tax minimisers.

Do not pay to register an ABN, you can do it yourself for free.
If you Google to register an ABN and end up in a site that asks for a fee them it's a commercial site making money from you, when the process is free.
If you need help I can do it for nothing as a Registered tax agent

AXXO Accounting and Management is open all days during the holiday period.
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