By Pinar Acay
Victoria is set to introduce a new short stay levy from 1 January 2025, targeting owners of properties used for short-term accommodation. This article explores the implications of the levy, its application and what property owners and operators need to consider as they prepare for these changes.
What Is the Short Stay Levy?
The short stay levy is a 7.5% surcharge on revenue generated by short-term rental properties, such as those listed on platforms like Airbnb and Stayz. It applies to properties rented for a continuous period of less than 28 days at a time and aims to encourage property owners to transition their properties to long-term rental markets, thereby alleviating housing supply pressures in Victoria.
This initiative follows similar measures introduced in other Australian states and internationally, aimed at regulating the burgeoning short-term rental industry.
Who Does the Levy Apply To?
The levy will apply to:
- Residential Properties Used for Short Stays: This includes apartments, houses, and other dwellings rented out for short-term accommodation but excludes some properties such as those occupied as the principal place of residence of the property owner and commercial residential premises.
- Hosts Operating Through Platforms: Individuals who rent their properties via short stay booking platforms will be required to pay the levy on the revenue they earn.
- Private Arrangements: Hosts renting directly to guests without using platforms may also be subject to the levy, as all earnings must be reported.
How Will the Levy Be Collected?
The Victorian Government intends to streamline the collection process by involving booking platforms. Platforms like Airbnb and Stayz will be responsible for calculating, collecting and remitting the levy directly to the government. This approach reduces the administrative burden on individual property owners.
For private arrangements, owners will need to declare short stay revenue in their lodgements with the State Revenue Office and pay the levy separately.
Key Implications for Property Owners
1. Increased Costs
The 7.5% levy will increase the cost of operating a short stay rental. Property owners may need to adjust pricing to maintain profitability, which could make short stays less attractive to renters.
2. Potential Shift to Long-Term Rentals
To avoid the levy, property owners may consider transitioning their properties to the long-term rental market. While this eliminates the surcharge, it involves committing to longer lease periods and complying with the Residential Tenancies Act 1997 (Vic).
3. Compliance and Reporting Obligations
Property owners will need to ensure accurate reporting of their short stay income. Failure to comply with the levy requirements could result in penalties.
Benefits of the Short Stay Levy
1. Addressing Housing Shortages
The levy is part of a broader effort to tackle Victoria’s housing crisis. By discouraging the proliferation of short stay rentals, the government hopes to increase the availability of long-term rental properties.
2. Funding Housing Initiatives
Revenue from the levy will be directed toward housing programs, including affordable housing developments and homelessness prevention.
3. Leveling the Playing Field
The levy aims to create a fairer competitive environment between short stay operators and traditional accommodation providers, such as hotels and motels, which are subject to other taxes and regulations.
What Should Property Owners Do Now?
1. Assess Financial Impacts
Evaluate how the levy will affect your short stay rental income. Consider pricing adjustments or alternative uses for your property.
2. Stay Informed
Keep up to date with the levy’s implementation details, including guidelines on compliance and enforcement.
3. Seek Professional Advice
Consult legal and financial experts to understand how the levy applies to your specific circumstances. A property lawyer can advise on regulatory compliance, while an accountant can help with financial planning and reporting obligations.
Final Thoughts
The short stay levy commencing on 1 January 2025 represents a significant shift in Victoria’s approach to regulating the short-term rental market. While it may create challenges for property owners, it also offers opportunities to contribute to long-term housing solutions.
This information is general in nature and not a substitute for legal advice. If you are a property owner or operator with questions about the short stay levy or need assistance with compliance planning, our team is here to help. Speak to our senior property lawyer Pinar Acay on (03) 8621 1000 or (03) 9331 1144 for tailored advice about your situation.
