Navigating Airbnb Tax
Regulatory changes are on their way for property Investors who choose to use their property for short-term stays (like Airbnb) or leave it vacant.
As the first of its kind in the country, the Victorian Government has introduced a new tax specifically for short-stay rentals. The short-stay property tax will commence from January 1, 2025 and is projected to yield an annual revenue of over $70 million.
The Short Stay Levy will be set at 7.5% of the revenue generated by short-stay accommodation platforms. In practical terms, a few days in a Melbourne property priced at $850 will now cost an additional $63.75, bringing the total cost to $913.75.
According to the government’s statement, there are more than 36,000 short-stay accommodation units across Victoria, with nearly half located in regional areas. Among these, over 29,000 are entire homes.
It’s important to note that some local government taxes on Airbnb-style accommodation may face elimination when the new tax takes effect. Certain councils already impose surcharges on short-term stays. For instance, Brisbane City Council introduced a 50% surcharge on properties listed for short-term rental for more than 60 days a year in their 2022-23 budget, subsequently increasing it to 65% in 2023-24.
How does this situation compare to other countries?
Bed taxes, in some form or another, are common internationally, but what’s unusual about the Victorian Government’s approach is its specific targeting of one type of tourist accommodation. The 7.5% rate also stands out, as many local taxes on short-stay accommodation typically fall in the 5% range (although California’s Transient Occupancy Tax can go as high as 15%, depending on the region).
Taxing vacant and short-term accommodation is not unique to Australia; it’s a global phenomenon. In British Columbia, the introduction of the Underused Housing Tax, a 1% tax on the ownership of vacant or underused housing from January 1, 2022, is credited with increasing the rental housing supply by up to 20,000 properties.
New York introduced strict rules in September 2023, making it harder for Airbnb-style rentals. Hosts now need to register if they rent for less than 30 days and must live in the property. Entire property rentals are no longer allowed, with a limit of two guests. Other cities like Amsterdam, Paris, and San Francisco also restrict how long entire homes can be rented each year.
Closer to home in Byron Bay, the local council is also tightening rules, limiting non-hosted holiday rentals to 60 days per year starting in September 2024.
But the big question remains: do restrictions on Airbnb and similar platforms genuinely increase the rental housing stock?
Professor Nicole Gurran at the University of Sydney’s School of Architecture suggests that Australia’s approach to regulating short-term rentals is relatively relaxed compared to global standards. The focus has been on boosting tourism, but she argues that the current housing crisis demands a more tailored approach. In a 2017 study, Gurran and Professor Peter Phibbs found that Airbnb had taken up 7% of housing in one Sydney area.
Governments will likely take the chance to profit from the thriving short-term rental market, but the specifics will depend on individual states and territories. We can also expect additional rules to ensure short-term rentals don’t harm long-term housing availability as this tax landscape evolves.
For personalised guidance, contact your Simmons Livingstone accountant on 1800 618 800 or via email to admin@simmonslivingstone.com.au.
