Private ruling: Am I in business - short term holiday rentals
Date of advice: 6 January 2026
Published: 2 March 2026
Ruling period: 1 July YYYY to 30 June YYYY | 1 July YYYY to 30 June YYYY | 1 July YYYY to 30 June YYYY | 1 July YYYY to 30 June YYYY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Are you carrying on a business of renting properties for short term accommodation for the purposes of reporting ordinary income under section 6-5 of the Income Tax Assessment Act 1997 ? | A1: No.

Relevant facts and circumstances: You, as an individual, own two properties to conduct short term accommodation activities. You have no other salary or wage job. You purchased Property 1 for $XX,XXX in YYYY. You purchased Property 2 for $XX,XXX in YYYY. Property 1 was purchased with the intention to be used for short term accommodation. Property 2 was purchased with the intention to be used as a studio and business office. Your intention of starting the activity was to increase profit and maximise return. You undertook initial financial estimates that indicated the activity would be viable. You undertook market research for both properties prior to commencing the activity. This was completed though visiting local businesses, consulting financial experts and research to help form your marketing strategy. The first guest stayed in Property 1 in YYYY. Property 2 became a short-term rental property at the end of XXXX, having its first guest soon after. The property had high occupancies at this time. Extension work costing you approximately $XXX,XXX was undertaken from YYYY to YYYY to make it habitable as it was in a harsh state. As listed on the last council rates notices issued the market value of Property 1 is $XXX,XXX and the market value of Property 2 is $XXX,XXX. There are no borrowings on both Property 1 and Property 2. The standard tariff for Property 1 is $XXX for a minimum X-night stay. This amount includes GST. The standard tariff for Property 2 is $XXX to $XXX for a minimum X-night stay. This amount includes GST. For both properties, X to X guests stay per booking. You do not employ staff. However, contractors are engaged to complete tasks such as housekeeping, gardening, window cleaning and other maintenance. The contractors utilise their own equipment and are engaged on an as-needed basis for each booking. For Property 1, the key to the property is kept in a safe and guests are messaged the evening prior with details of the property and access. Property 1 is self-contained accommodation (not serviced). On a stay longer than XX nights a clean linen and towel service is offered at the mid-way point or weekly depending on the season. A housekeeper visits on check-in days, turns on lights and heater and leaves fresh provisions. You are available by phone or email to attend to any difficulties. As Property 2 is self-contained accommodation (not serviced), there is a linen change and wet area clean at the mid-point on a stay of more than X nights or on a weekly basis on a stay of X weeks or more. Housekeeping is outsourced for Property 2. You live close to Property 2 which allows you to interact with guests more closely. Both properties feature a change over where X, X, breakfast provisions and treats are made available to new guests. You work an average of XX hours per week on the activity. Your role in managing the properties includes: • Advertising and promotion (international, national, statewide and regional). • Maintaining listings with regional tourism boards. • Maintaining Quality Tourism Accreditation and star ratings, renewed annually. • Undertaking tourism training and development courses. • Managing the websites for each property. • Processing bookings and guest communication. • Bookkeeping and compliance with SRO Short-Stay Levy requirements. • Liaising with booking platforms and tourism partners. • Developing marketing initiatives, including collaborations with a local business. • Scheduling and coordinating contractors. • Maintaining emergency contacts for urgent trades (e.g. plumbing and electrical) Both Property 1 and Property 2 have received multiple accreditations. This involves rigorous inspections every 18 months to 2 years to assess the properties standards. All bookkeeping and record of income and expenses are maintained on a commercial booking software. You have provided profit and loss statements for the years subject to this ruling for Property 1, which show net losses being made in all X relevant years. You have provided profit and loss statements for the years subject to this ruling for Property 2, which show net profit of less than $XX,000 per year being made in the first X years and a net loss for the first X months of the last year. An excel spreadsheet is used for each property to record all bookings, related commissions and booking fees. Both properties have their own websites for marketing and booking purposes. A channel manager is used to manage bookings through the websites and is connected to other booking platforms for efficient management. It is used to keep up to date with calendar and payment systems for direct bookings. Both properties are listed on multiple short term accommodation websites where guests can book and pay for their stays. Rent that's guests pay is determined by the market. GST is charged on the rental income. Both properties have a minimum stay of X-X nights. However, stays of more than X weeks are considered. Stays for both properties range from X-XX nights. Due to Property 1's nature, it closes for several months during winter for extensive restoration and maintenance work. You have a dedicated office space within your home and is exclusively used to manage accommodation activities. The office is also used to store linen and consumables for Property 2. You have not created a formal business plan. There are no real estate agents or property agents involved in the activity. The properties have separate bank accounts which are not used for private purposes. You do not use the property for private purposes.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: You are not carrying on a business of short-term rental accommodation. | Detailed Reasoning - Detailed reasoning: All legislative references are to the Income Tax Assessment Act 1997 unless otherwise stated. Under section 6-5, assessable income includes ordinary income. Ordinary income is defined as 'income according to ordinary concepts'. Typical examples of ordinary income include salary, wages, dividends, rent, and proceeds from carrying on a business. Normally the receipt of income from the letting of property to a tenant does not amount to carrying on a business. Whether the activity of letting property amounts to the carrying on of a business will depend on the circumstances of each case. A person who simply owns an investment property or several investment properties, either alone or with other co-owners, is usually regarded as an investor who is not carrying on a rental property business. This is because of the limited scale of the rental property portfolio and the nature and extent of the involvement of the owner in the provision of services to the tenants of these properties. Business is defined under section 995-1 to include any profession, trade, employment, vocation or calling, but does not include occupation as an employee. Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? (TR 97/11) provides a guide to the indicators that are relevant to whether or not a person is carrying on a business of primary production. While written for primary producers, these indicators are the consolidation of many years of case law and have broad application over many industries. TR 97/11 identifies the following indicators for consideration in determining whether a taxpayer is carrying on a business for taxation purposes The relevant indicators are as follows: • whether the activity has a significant commercial purpose or character; this indicator comprises many aspects of the other indicators; • whether the taxpayer has more than just an intention to engage in business; • whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity; • whether there is repetition and regularity of the activity; • whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business; • whether the activity is planned, organised and carried on in a businesslike manner such that it is directed at making a profit; • the size, scale and permanency of the activity; and • whether the activity is better described as a hobby, a form of recreation or a sporting activity Paragraph 15 of TR 97/11 states that no one indicator is decisive ( Evans v. FC of T 89 ATC 4540; (1989) 20 ATR 922). In addition, paragraph 16 of TR 97/11 states the indicators must be considered in combination and as a whole and whether a business is being carried on depends on the 'large or general impression gained' ( Martin v. FC of T (1953) 90 CLR 470 at 474; 5 AITR 548 at 551) from looking at all the indicators, and whether these factors provide the operations with a 'commercial flavour' ( Ferguson v. FC of T (1979) 37 FLR 310 at 325; 79 ATC 4261 at 4271; (1979) 9 ATR 873 at 884). However, the weighting to be given to each indicator may vary from case to case. | Detailed Reasoning - Whether the activity has a significant commercial purpose or character: An activity can be considered to have significant commercial purpose or character if it has a business plan, a profit-making purpose, and can be shown to be carried on in a commercially viable manner. The business planning process itself includes knowledge of or research into marketing the product or service provided, capital requirements and how these might be met, costs, legal requirements, and the size and scale needed for commercial viability. You have approximately XX years of experience in short term rental accommodation and based on that experience believed you could profit from the activity. You have a property portfolio of 2 properties that has provided you with income. While you did not create a formal business plan, you did perform market research and consult different financial experts to create financial estimates. However, you did not diversify your property portfolio by purchasing additional properties to grow the activity over multiple years since the activity commenced. Therefore, the activity did not grow to be that of a commercial nature. | Detailed Reasoning - Whether there is a purpose of profit as well as a prospect of profit from the activity: A business must have a purpose as well as a prospect of profit. This includes planning and activity that is directed towards making a profit and being able to demonstrate how that profit is to be made. You held Property 1 for XX years and Property 2 for XX years. While you did have an intention to make a profit from the activity, you did not look to expand your rental property portfolio and manage the expenses to generate profits from the activity. While you did make a net profit on Property 2 from financial years YYYY to YYYY and have an intention to in the YYYY financial year as per your draft profit and loss statement, the small amount of profit does not show adequate amounts of profit to that of usual short term accommodation business activity. Further, you made a loss on Property 1 from financial years YYYY to YYYY, and you do not expect to make a profit in the YYYY financial year as per your draft profit and loss statement. Because of the length of time you have been conducting the activity, and multiple years with large amounts expenses, there were no indicators to show that a significant profit will be made from your rental activities in the future. | Detailed Reasoning - Whether there is repetition and regularity of the activity: Activity must be undertaken on a continuous and repetitive basis, as appropriate to the industry, for it to be considered a business. You did stipulate the hours spent on average managing the properties as being an average of XX hours per week. Based on the activities completed before, during, and after guests stays, your commitment to this activity can be considered continuous and regular. | Detailed Reasoning - Whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business: An activity can more readily be recognised as commercial if it is of same kind and carried on in a similar manner to other businesses in the same industry. You have created a website to market your properties and listed them on multiple booking platforms to increase visibility and attract customers. You have received and maintained multiple accreditations through periodic inspections to maintain quality standards. Your actions and involvement do go beyond that of an investor as you are located close to one of the properties, personally perform services and coordinate contractors. | Detailed Reasoning - The size, scale, and permanency of the activity: An activity would be expected to be of a size, scale, and permanency suitable to the industry it is operating in to be recognised as a business. With your property portfolio only being 2 properties, and housing X to X guests at a time, there is no significant size or scale of the activity. However, there is a sense of permanency as per the length you have conducted the activity and held the properties. | Detailed Reasoning - Conclusion: Although there are some supporting factors indicative of a business, there are a number of factors carrying more weight that indicate a business is not being carried on, and that the activity is closer to being an investor. Of note is the commercial purpose or character and whether there is a purpose of profit as well as prospect of profit from the activity. In weighing up the relevant factors the Commissioner considers that you are not carrying on a business of providing short-term accommodation in the relevant income years.