The Short Stay Levy Act 2024 (Vic): Implications for Short-Term Accommodations in Victoria

Effective 1 January 2025, the Short Stay Levy Act 2024 (Vic) introduced a 7.5% levy on short-term accommodation bookings. This levy has widely become known as the “Airbnb tax” and is aimed at addressing the state’s housing shortage by encouraging property owners of current short-stay rentals to transition their properties into long-term leasing options, thereby increasing the availability of permanent housing.

Scope of the Levy

The levy applies to revenue derived from short-term accommodations, defined as bookings for periods not exceeding 28 consecutive days, booked on or after 1 January 2025. It encompasses bookings made both through platforms such as Airbnb, as well as bookings made directly to the host (i.e. without a booking platform). Notably, the levy encompasses all associated fees, including cleaning charges and Goods and Services Tax (GST).

Exemptions exist for accommodations categorised as commercial residential premises under the A New Tax System (Goods and Services Tax) Act 1999 (Cth), which includes hostels, motels and hotels. Additionally, primary residences used occasionally for short-term rentals are excluded. However secondary dwellings, such as granny flats or tiny homes located on the same property, are subject to the levy.

Compliance and Payment Mechanisms  

For bookings made through a major platform, such as Airbnb, the levy is automatically collected from guests at the time of booking.  The purpose being to ensure compliance by the host. If the host believes that an exemption applies to them, they are required to submit a declaration to the platform to ensure that the levy is not incorrectly applied to their listing.

In cases where hosts accept direct bookings without intermediary platforms, they are required to register with the State Revenue Office if their property is not exempt from the levy. Hosts generating annual short stay booking revenue exceeding $75,000 must remit the levy quarterly, whereas those with annual revenue below this threshold, are liable for annual payments.

Policy Objectives and Economic Impact

The Victorian Government projects this levy alone will generate over $70 million in revenue each year, earmarked for social and affordable housing projects managed by Homes Victoria. Notably, 25% of the revenue has been specifically allocated to developments in regional areas.

In conjunction with the implementation of the levy, local councils and owner’s corporations have been granted new regulatory powers. Councils may impose restrictions or even prohibit short-term accommodations within their jurisdictions, while owners’ corporations can vote to restrict such rentals within their properties. These measures aim to balance the interests of residents and the tourism industry, ensuring the needs of the community are prioritised.

Divergent Stakeholder Perspectives

The introduction of the levy has elicited mixed reactions. Key stakeholders in the tourism sector have expressed concerns that the additional levy may deter visitors, particularly in regional areas where they heavily rely on tourism.

Conversely, the levy has been viewed by others as a necessary step in regulating the shorty-term rental market. The latter taking the view that the levy will assist in stabilising the housing market by seeing short-term rental properties convert to long-term leasing arrangements.

Future Considerations

The efficacy of the levy in addressing Victoria’s housing challenges remains uncertain. Likewise, its long-term ramifications on the housing market, tourism and the broader economy will become clearer over time.

For further information please contact:

Tayla Berger
Senior Associate
T: 03 5226 8559 | M 0407 825 365
E: tberger@ha.legal

Alasdair Woodford
Principal
T: 03 5225 5217 | M: 0436 456 144
E: awoodford@ha.legal

Joseph Flanagan
Senior Associate
T: 03 5226 8504 | M 0491 307 550
E: jflanagan@ha.legal

Madeline Thompson
Law Clerk
T: 03 5225 5209
E: mthompson@ha.legal