Victoria’s Short-Stay Property Tax announced

Inaugural short-stay property tax set to be implemented from 1 January 2025

Regulators are taking aim at property investors who opt for short-term stays or leave their properties vacant.

The Victorian Government's recent Housing Statement announced Australia's inaugural short-stay property tax, set to be implemented from 1 January 2025.

The Short Stay Levy will be 7.5% of short-stay accommodation platforms' revenue. For example, a few days in a Melbourne property at $850 will incur an additional $63.75, bringing the total cost to $913.75.

For Victorian investment property owners, this follows a temporary land tax surcharge starting from the 2024 land tax year and a reduction to the tax-free threshold for general land tax rates from $300,000 to $50,000. Additionally, for foreign owners of Victorian property, there is an increase in the absentee owner surcharge rate from 2% to 4%.

Some Victorian local government taxes on Airbnb-style accommodation will be eliminated once the new tax is in effect.

Around Australia, several councils already impose surcharges on short-stay accommodation. For instance, Brisbane City Council implemented a 50% rate surcharge on properties listed for short-term rental for more than 60 days a year in their 2022-23 Budget, only to raise it to 65% in 2023-24.

Byron Bay Council plans to limit non-hosted holiday letting to 60 days per year in most areas starting from September 2024. The Victorian Government's decision to implement a 7.5% bed tax on short-stay accommodation stands out due to its specific targeting of this type of lodging, and the relatively high tax rate compared to the global average of around 5%.

So, what's the trajectory here?

In Victoria, this new tax is anticipated to generate over $70 million annually. According to the statement, there are over 36,000 short-stay accommodation places, nearly half of them located in regional Victoria, with over 29,000 being entire homes. Airbnb's ANZ Country Manager, Susan Wheeldon, contends that short-term rentals in Victoria constitute less than one per cent of the total housing stock. She argues that acute housing issues predate Airbnb and targeting these properties is not a long-term solution.

Governments are likely to seize the chance to participate in the thriving short-term rental market. The specifics of how this unfolds will heavily rely on the policies of individual States and Territories. Apart from generating revenue, additional regulations are expected to safeguard against the private gains from short-term rentals compromising the availability of long-term accommodation.