From January 1, 2025, there will be a new levy (sometimes referred to as the ‘Airbnb tax’) applicable to short stay accommodation in Victoria. Owners, residential tenants and providers of booking platforms may be liable for the levy. The levy applies to total booking fees for short stays, whether bookings are made on a booking platform or directly with providers of short stay accommodation.
Background
In September 2023, the Victorian State Government announced the short stay levy as part of its Housing Statement. The Housing Statement provided that revenue from the short stay levy would be paid to Homes Victoria to support their work building and maintaining social and affordable housing across the state, with 25% of the funds to be invested in regional Victoria.
The relevant legislation, the Short Stay Levy Act 2024 (“Act”), was released about a year later. It received Royal Assent on 29 October 2024 and will commence from 1 January 2025.
Below we set out some key aspects of the short stay levy. Please note that this publication is not intended to cover all provisions of the new Act and all possible nuances and complexities that could arise once it becomes operational.
Application and rate of the levy
The levy applies to a short stay in short stay accommodation located in Victoria for which a fee is payable. The rate is 7.5% of the total booking fee (including GST and cleaning fees, where applicable).
What does a ‘short stay’ mean?
A short stay means occupation of the premises for a continuous period of less than 28 days.
What is ‘short stay accommodation’?
Short stay accommodation means any premises that can accommodate a person, excluding premises that are occupied as the principal place of residence of the owner or renter, commercial residential premises and certain other specified types of premises.
There is an integrity provision under which premises are taken not to be the principal place of residence of a renter if, in the Commissioner’s opinion, the residential rental agreement for the premises is made for the purpose of avoiding payment of the short stay levy.
It does not matter whether or not the premises are used for more than one purpose, including a purpose other than the provision of short stay accommodation. It also does not matter whether or not the premises are permanent or temporary, or fixed to land or mobile.
Premises mean:
- the whole or part of any building or other structure; or
- a caravan or any other vehicle.
The relevant Explanatory Memorandum provides the following example in respect of the concept of premises:
Person A is the owner of a two-storey property, that has two separate premises. The property is under one title; however, each premises has its own entrance, living quarters and kitchen and bathroom facilities. Person A occupies the first-floor premises as their principal place of residence whilst the ground-floor premises is used for short stay accommodation. Each time a short stay is completed at the ground-floor premises, it will be subject to the short stay levy. However, each time a short stay is completed at the first-floor premises it will not be subject to the short stay levy as it is Person A’s principal place of residence.
Liability for the short stay levy
The party liable for the levy depends on who the short stay booking was made with, as set out below:
- If made through a booking platform: the booking platform provider is liable to pay the levy.
- If made directly with a renter of the accommodation who has a residential rental agreement with the owner or other person who has an occupancy agreement (as relevantly defined) with the renter: the renter is liable to pay the levy.
- In any other case: the owner of the accommodation is liable to pay the levy. The owner generally refers to the holder of the freehold interest in land, unless the land is Crown land in which case the owner can be the lessee or licensee of the land.
Licensees or other exclusive occupants of premises (other than owners and renters) who provide short stay accommodation through direct bookings are required by the Act to pay amounts to the owner or renter (as the case requires) sufficient to cover the levy payable plus any GST and any applicable interest or penalty tax. If these amounts are not paid, the owner or renter will have the right to recover the amount from the licensee or occupant.
What counts as a ‘booking platform’?
A booking platform means anything provided by a person carrying on the business of:
- facilitating requests to book short stays in a short stay accommodation; and
- arranging or facilitating the acceptance of those requests by or on behalf of short stay accommodation providers.
Platforms can still count as a booking platform, even if they are not online, do not use any automation, do not take payments for bookings or are provided by a business located outside of Victoria.
What is the ‘total booking fee’?
The total booking fee means the total amount that is payable for a short stay booking. It includes any amount included in respect of GST, any amount included in respect of the short stay levy and other fees such as cleaning fees.
It does not include any amount waived or provided as a credit or refund on the cancellation of a booking. Where a credit is provided, if the credit is used for another short stay booking in the short stay accommodation, that booking will attract the levy (subject to any applicable exception at the relevant time).
The total booking fee also does not include charges that may apply in respect of the payment method used (for example, a credit card fee).
Administration and collection of the levy
The Victorian State Revenue Office (“SRO”) will administer the Act and collect the short stay levy.
In effect, the Act is included as a taxation law governed by the Taxation Administration Act 1997. This gives the Commissioner of State Revenue and the SRO the power to administer the levy using the same framework that applies to other taxation laws such as land tax, including the ability to carry out investigations and impose penalty tax and interest on non-compliance.
Obligations of booking platform providers, owners and renters
There are various obligations under the Act. These include the need for booking platform providers and owners/renters who take short stay bookings on or after 1 July 2025 to register with the SRO to make lodgements of returns and payments of the levy.
The return period is either quarterly or annually, depending on the booking fees for short stays that are completed in the previous calendar year. Where those fees amount to $75,000 or more, the return period for the short stay levy is quarterly (1 January, 1 April, 1 July and 1 October). Where those fees amount to less than $75,000, the return period is annually.
The application for registration must be made before the end of the first return period in which the person is liable for the levy. The deadline for the lodgement of the return and payment of the levy is 30 days after the end of the applicable return period.
If the owner or the renter of premises made available for short stays on a booking platform claims the accommodation to be outside the scope of the levy, they must provide a declaration of this to the booking platform provider. If the declaration is later found to be incorrect, the person who made the declaration and the booking platform provider are jointly and severally liable to pay the levy and any interest and penalty tax payable. The booking platform provider may then look to recover any levy paid by them from the person who made the declaration.
At the time of writing, the relevant SRO registration form/portal is not ready yet. According to the SRO, more information on the registration and lodgement process “will be available … soon”.
When does the levy apply?
The Act takes effect from 1 January 2025 and applies to short stay bookings that are made on or after that date. Bookings that are made prior to 1 January 2025 will not be subject to the levy, irrespective of whether the stay is after that date.
Liability for the short stay levy arises on the completion of a short stay in short stay accommodation. If a short stay booking is cancelled and the total booking fee is waived, credited or refunded, then no liability for the short stay levy arises in respect of that cancelled booking.
Our preliminary view
While the Housing Statement stated that the revenue will go to Homes Victoria, there is nothing in the Act that appears to provide for the hypothecation or “quarantining” of the levies to establish the direct link between the levies collected and Homes Victoria. We therefore question how much of the levy will in fact be received by Homes Victoria, particularly in light of the State’s enormous existing debt.
The cited policy reason for the introduction of the levy is also questionable.
The rationale for the levy, according to the Victorian Treasurer, is to “encourage the return of more properties to the long-term rental market”, in recognition that “while short stay accommodation has become a popular feature of Victoria’s visitor economy, it has reduced the ability for many properties to be used for longer-term accommodation” and “the Government recognised the issues with adequate access to long-term rental properties across the state”.
Somewhat contradictorily, the Housing Statement acknowledged that almost half of short stay accommodation places are in regional Victoria and places there cannot be used for longer-term accommodation or rented out on fixed term agreements.
While the need for more long-term housing is undeniable, if almost half of the leviable short stay accommodation is in areas or subject to permit restrictions that mean that they will not be used for longer-term accommodation in any event, how does the levy enhance the supply of longer-term rental properties, especially where there appears to be no stipulation that levies raised will actually be directed towards increasing the supply of such accommodation? As far as we are aware, there is no modelling or evidence that a levy on short stay accommodation will boost the supply of long-term rentals.
There is a parallel with the Vacant Residential Land Tax (“VRLT”), which has been expanded to cover all of Victoria (link to our article on the VRLT). The State Government realised only relatively recently that that due to the cyclical and seasonal demand for accommodation in alpine resort areas, lands located in these areas are likely to be considered vacant for VRLT purposes. In recognition that the imposition of VRLT on lands located in alpine resort areas would be inconsistent with the purpose of VRLT which is to encourage owners of vacant residential homes to make them available for use as long term accommodation, the Government has, only within the last two weeks, proposed a legislative amendment to exclude land located in Victoria’s alpine resort areas from the imposition of VRLT.
We believe that a similar approach should be considered in respect of the short stay levy. Absent proper consideration and alignment between the policy underpinning the levy and the application and collection of the levy, it is very likely that the levy will produce unintended consequences, including potentially more pressure on housing affordability and supply, disincentives for the visitor economy and reason (or added reason, taking into account the COVID debt levy for land tax and payroll tax as well) for businesses who rely on tourism to look elsewhere.
A challenge to the legality of the levy is currently being considered and time will tell whether such a challenge will ultimately be successful. In the meantime, we will continue to advocate for sensible approaches and amendments to the state taxation environment.
What are the next steps?
Persons who may be liable for the short stay levy should seek to understand their obligations (if any) under the complex new short stay levy provisions, which will go live in less than two months.
If you would like assistance in relation to the short stay levy, please contact a Pitcher Partners representative.
