Renting Out a Holiday Home: NZ Mixed-Use Asset Rules

Plenty of Auckland families own a bach at the beach or a holiday home a few hours out of the city, and rent it out when they are not using it. If that describes you, the mixed-use asset rules decide how much of the running costs you can claim against the rental income.

This guide explains when the rules apply, how the expenses are split, and what happens if the property makes a loss. It reflects the rules as at June 2026. It is general information, not tax advice.

When the rules apply

A holiday home is a mixed-use asset in a tax year if it is both:

• used for private and income-earning use during the year, and
• unused for 62 days or more during the year.

Private use means use by you, your family or other associated people. Simply being available for use does not count as use.

If both conditions are met, you must use the mixed-use asset rules. If the property is unused for fewer than 62 days, or it is rented out but never used privately, you use the actual cost method instead.

What the rules do not cover

The mixed-use asset rules specifically exclude:

• residential property used as a long-term rental
• a room in your own home rented out for short stays
• a home office claimed on a floor-area basis.

So a normal Auckland rental with a long-term tenant is not affected, even if it sits empty for a while between tenancies. Our guide to what expenses landlords can claim covers the standard rules for those.

How expenses are split

Under the rules, the costs of a mixed-use holiday home fall into three groups.

Fully claimable. Expenses that relate only to earning income from the property. Advertising it for rent, a platform's fees, or repairing damage caused by paying guests all fall here.

Not claimable. Expenses that relate only to your private use. A boat, a quad bike or other equipment that is locked away when guests stay is a private cost.

Apportioned. Expenses that cannot be classed as either, because they relate to the property as a whole. These generally include interest on loans secured against the property, rates and insurance. They are split using this formula:

Apportioned expenses × income-earning days ÷ (income-earning days + private days)

Days the property is empty do not appear in the calculation at all.

A worked example

Paul owns a holiday home in Waihī. Over the tax year:

• he and his family used it privately for 32 days
• it was rented out for 45 days
• the expenses that need apportioning, such as rates, insurance and interest, came to $11,500.

Paul can claim:

$11,500 × 45 ÷ (32 + 45) = $6,721

The remaining $4,779 relates to private use and cannot be claimed. Any fully claimable expenses, such as cleaning between guests, are added to the $6,721.

If the property makes a loss

Holiday homes often cost more to run than they earn. The rules limit how much of a loss you can claim.

If your apportioned deductions are more than the income from the property, and that income is less than 2% of the property's value, your deduction for the year is capped at the amount of the income. The excess is carried forward to a future year when the property earns more than its deductions.

For this test, the property's value is the most recent of its rateable value or purchase price.

Opting out

You can choose to leave the property out of your income tax and GST returns if, for the tax year:

• your gross income from renting it out is less than $4,000, or
• it is loss-making and that income is less than 2% of its value.

The trade-off is simple: you do not pay tax on the income, but you cannot claim any expenses. For a property that is let only for a few weeks a year, that is often the simpler option. These opt-outs do not apply to holiday homes owned by companies.

GST

Long-term residential rent is exempt from GST, but renting out short-stay accommodation is a taxable activity. If your turnover from all taxable activities is over $60,000 in a year, you must register for GST, and the mixed-use rules apply for GST too. Our guide to GST on Airbnb and short-stay rentals explains the registration test and how platform bookings are taxed.

Records to keep

The mixed-use calculation depends entirely on day counts, so keep a simple log through the year:

• each day the property was used privately, and by whom
• each day it was rented, and the rent received
• invoices for every expense, marked as income-related, private or shared.

A shared calendar or booking platform export does most of the work. Our guide to keeping records for landlord tax has more on what Inland Revenue expects.

Holiday home or long-term rental?

Some owners find that the effort of a part-time holiday rental is not worth the limited deductions. If you are weighing whether to rent the property long-term instead, our comparison of Airbnb and long-term renting sets out what changes. For an Auckland property, a free rental appraisal gives you the long-term rent to compare against.

Inland Revenue's page on mixed-use assets sets out the full rules, including how they apply to boats and aircraft. The rules around losses and part-year sales are technical, so talk to a chartered accountant if they affect you.