With the new financial year approaching, several proposed tax and superannuation changes are on the horizon that could affect property owners, retirees and high-balance superannuation members.

Below is a summary of some key developments currently flagged by the Australian Taxation Office (ATO) and the Federal Government. While some of these measures are still in draft form, they highlight areas where taxpayers may need to review their arrangements.

 

Using Your Holiday Home to Derive Rental Income 

Many Australians own a holiday home that is used both for personal getaways and to generate income through short-term rentals such as Airbnb.

Historically, it has been common practice to claim deductions for property expenses — including mortgage interest, insurance, council rates and maintenance — as long as those expenses were appropriately apportioned between personal use and rental use, typically based on time.

However, the ATO is proposing to significantly tighten the rules from 1 July 2026, following the release of draft guidance including TR 2025/D1, PCG 2025/D6 and PCG 2025/D7.

Under the draft ruling, holiday homes that are mainly used for personal purposes may be classified as “leisure facilities.” If this occurs, many ownership-related expenses could become non-deductible, even if the property earns some rental income.

This means expenses such as:

• Mortgage interest
• Insurance
• Council rates
• Maintenance
• Other holding costs

may no longer be deductible if the property is primarily used for private holidays.

 

Example (ATO guidance) 

Daniel and Kate own a beach house but live in an apartment closer to the city with their two children. The house is located in a popular holiday destination and is advertised on short-term rental platforms.

They block out school holidays for their own use and typically stay at the property for two weeks over Christmas and New Year, as well as another two to three weeks throughout the year. If they decide not to use the house at certain times, they open it up for rental.

Because their personal use (and blocked-out periods) often coincide with peak rental periods, the property is only rented out for limited times during the year.

Under the proposed rules, the property would likely be considered a holiday home primarily used for personal purposes. As a result:

• Rental income must still be declared.
• Ownership expenses would not be deductible to the extent they relate to holding the property.

However, expenses directly associated with renting the property would still be deductible. These may include:

• Platform service fees or commissions
• Advertising costs
• Cleaning costs after guest stays

If a property is mainly used to generate rental income, deductions would still generally be available.

If you currently rent out a holiday home — even occasionally — these proposed changes could affect the deductions you claim.

 

Superannuation Contribution Caps Set to Increase 

Recent economic data, including the Average Weekly Ordinary Time Earnings (AWOTE) index and CPI figures, indicates that several superannuation thresholds will increase from 1 July 2026.

The expected changes include:

Concessional (pre-tax) contribution cap

• Increasing from $30,000 to $32,500 per year 

Non-concessional (after-tax) contribution cap

• Increasing from $120,000 to $130,000 per year

Bring-forward contribution cap

• Increasing from $360,000 to $390,000 over three years

Transfer Balance Cap

• Increasing to $2.1 million, which is the maximum amount that can be transferred into the retirement phase.

These increases may create additional opportunities to grow retirement savings.

For some individuals who were previously unable to make non-concessional contributions due to cap limits, the higher thresholds may allow new strategies to be considered.

 

Division 296: A New Tax on High Super Balances 

A new tax targeting large superannuation balances — known as Division 296 — is set to take effect from 1 July 2026.

Originally announced in 2023, the measure introduces additional tax on the earnings associated with superannuation balances exceeding $3 million.

The objective of the measure is to reduce the tax concessions available for very high super balances.

Under the rules:

• Individuals with more than $3 million in super will pay additional tax on the proportion of earnings relating to the amount above that threshold.
• Higher rates will apply for individuals with balances exceeding $10 million.

While this change will only affect a relatively small number of Australians, it represents a significant shift in how large super balances are taxed.

 

ATO Draft Guidance on Inherited Homes 

The ATO has recently issued a draft Taxation Determination regarding rights to occupy a dwelling under a deceased estate.

Under current law, a deceased person’s main residence can generally be sold without capital gains tax (CGT) if certain conditions are met.

Typically, this requires either:

• The property being sold within two years of the date of death, or
• The property being used as the main residence of certain qualifying individuals from the date of death until sale.

Qualifying individuals can include:

• The deceased’s surviving spouse
• A beneficiary who inherits the property
• A person who has a right to occupy the home under the will

The ATO’s draft determination clarifies that:

• The right to occupy the property must be explicitly granted in the will to a named individual.
• Broad trustee powers, separate agreements, or arrangements through testamentary trusts may not be sufficient to qualify.

This highlights the importance of carefully structured estate planning to ensure intended tax outcomes are achieved.

 

Need Advice? 

With several tax and superannuation changes on the horizon, it may be worth reviewing your current arrangements — particularly if you own a holiday home, are planning super contributions, or are involved in estate planning.

If you would like to discuss how these developments may affect your situation, feel free to get in touch with the Qubed Advisory team.