Rental Income Reporting 2026: What Landlords Must Declare to the ATO

The ATO is cracking down on undeclared rental income in 2025-26 – here's what every landlord and Airbnb host needs to report, plus the penalties for getting it wrong.

By ECTD Editorial · Published 2026-06-29 · Updated 2026-06-29

If you own an investment property or rent out a room on Airbnb, the ATO is watching more closely than ever. From July 2025, the Tax Office has expanded its data-matching program to capture rental income from platforms like Stayz, Booking.com, and Airbnb, as well as traditional tenancies. Here's exactly what you need to declare in the 2025-26 financial year – and what happens if you don't.

What counts as rental income?

The ATO defines rental income broadly. It's not just the weekly rent from a long-term tenant. You must include: rent payments (including bond retained for rent arrears), Airbnb or short-stay platform earnings, rent received from a family member (even at a discount), and any goods or services received instead of rent (e.g., a tenant doing gardening in lieu of $200 rent).

For the 2025-26 year, the ATO's data-matching program will collect records from sharing economy platforms and real estate agents, cross-referencing them against your tax return. If you received $600 or more from a platform, they'll report it to the ATO automatically. But even if you earned less, you still need to declare it.

Long-term rent from tenants
Short-stay accommodation (Airbnb, Stayz, Booking.com)
Rent from a room in your own home (if you live there)
Bond money you keep because a tenant broke the lease
Insurance payouts for lost rent
Lease surrender payments

Common mistake: not declaring Airbnb income: The ATO's data-matching program now covers all major short-stay platforms. If you list a property on Airbnb for even a few weeks a year, that income must appear in your tax return. The ATO can see both the gross amount paid by guests and the platform fees deducted. Don't assume small amounts fly under the radar – they don't.

What about renting out part of your home?

If you rent out a room in the house you live in, you must declare the rent you receive. However, you can only claim expenses for the portion of the property used to generate that income. The ATO expects you to apportion costs like mortgage interest, council rates, and insurance based on floor area or number of rooms. For example, if your house has four rooms of equal size and you rent out one, you can claim 25% of those expenses.

Be careful with the 'main residence exemption' for capital gains tax. If you rent out part of your home, you may lose the full exemption on that portion when you sell. Get advice before you start.

New for 2025-26: ATO data matching expanded

From July 2025, the ATO's rental property data-matching program includes: all real estate agents (they report tenant details and rent paid), short-stay platforms (Airbnb, Stayz, Booking.com, etc.), and property management software providers. The ATO is using this data to pre-fill tax returns and to identify discrepancies. If your declared rental income is less than what the data shows, you'll get a letter asking why.

The ATO estimates that around 1 in 5 rental property owners make errors in their tax returns. The most common mistake is simply forgetting to declare income from short-stay rentals or a room rented to a flatmate. The second most common is overclaiming expenses – but the ATO is equally focused on income under-reporting this year.

How to report rental income on your tax return

You report rental income and expenses on the 'Rental property schedule' in your tax return (or via myTax if you're doing it yourself). The key items are: total rental income (gross, before agent fees or platform commissions), and total rental expenses (which you can claim against that income). If your expenses exceed your income, you have a rental loss – which may be negatively geared.

For the 2025-26 year, the ATO has updated the schedule to include a specific field for 'short-stay platform income' – so you can't lump it in with long-term rent. Make sure you separate them. Also, you must report income in the year it is received, not when it is earned. So if a guest pays in June 2026 for a July 2026 stay, that income belongs in 2025-26.

Tip: Keep a rental income log: Use a simple spreadsheet or an app like 'ATO Rental Property' to record each payment date, amount, and source. This makes it easy to reconcile with the data the ATO already has. It also helps if you're ever audited – you can show exactly where every dollar came from.

Penalties for not declaring rental income

The ATO takes undeclared income seriously. If you fail to include rental income in your 2025-26 return, you face: a penalty of 25% to 75% of the tax shortfall (depending on whether it's deemed a 'failure to take reasonable care' or 'intentional disregard'), plus the tax you owe, plus interest (the General Interest Charge, currently 11.46% per quarter).

If you voluntarily disclose an error before the ATO contacts you, penalties are reduced significantly – often to 0% for the first time. Use the ATO's voluntary disclosure tool online. But if the ATO's data match flags you first, expect the full penalty.

What about expenses? A quick refresher

While this article focuses on income, it's worth noting that you can claim expenses against your rental income. For 2025-26, the ATO allows deductions for: agent fees, repairs and maintenance (not improvements), council rates, insurance, interest on loans used to purchase the property, and depreciation (subject to the $20,000 instant asset write-off for eligible assets).

But remember: you can only claim expenses for the period the property was genuinely available for rent. If it was vacant for six months with no effort to find tenants, you can't claim those expenses. The ATO expects evidence of active marketing – ads, agent listings, etc.

Record-keeping requirements: The ATO requires you to keep records for five years after you lodge your tax return. For rental properties, this includes: lease agreements, rent receipts, bank statements showing rent deposits, invoices for expenses, and platform statements (Airbnb etc.). If you use a property manager, get quarterly statements and keep them.

Final checklist for lodging your 2025-26 return

Gather all rental income statements (agent, platform, direct payments)
Separate short-stay income from long-term rent
Reconcile total income against ATO pre-fill data
Apportion expenses correctly if you rent out part of your home
Declare all bond money retained (even if not yet transferred to you)
Check if you need to register for GST (if rental income exceeds $75,000 from short-stay)

The ATO's message for 2025-26 is clear: if you earn rental income, declare it accurately. The data-matching net is wide and getting wider. If you're unsure about any aspect of your rental property tax, speak to a registered tax agent – the cost is deductible, and it could save you thousands in penalties.

General information only — not personal financial, tax, legal or medical advice. Consider your own situation and consult a licensed professional before acting. Figures are current as at the date shown above.