As part of the Victorian Government’s Housing Statement released in 2023, the government has sought to address the growing need for more long-term housing to support population growth in Victoria by introducing a levy on short stay accommodation platforms.
It identified that a rise in the number of short stay accommodation options in Victoria has led to a significant decrease in availability and a subsequent increase in prices of long-term rental rentals and fixed-term leases in the state.
To address these issues, the Victorian Government has legislated the Short Stay Levy Act (Vic) 2024 (the Act) which imposes a levy on short stays (Levy) of 7.5 per cent in Victoria from 1 January 2025.
What stays are captured?
The Act specifies that a short stay is a stay for a continuous period of less than 28 days. Any stay for a continuous period that is longer than 28 days is not considered a short stay and will not be subject to the Levy. The Levy will not apply where a guest cancels their booking and is refunded the full amount, but will still apply where a guest does not commence their stay and does not cancel their booking.
In an attempt to divert more residential lots from the short-stay market to long-term residential accommodation, the Act has also made amendments to the Owners Corporations Act 2006, authorising owners corporations to prohibit the use of lots as short-stay accommodation.
Calculation of the Levy and who is liable?
Liability for the Levy will arise on the day that the short stay is completed and will be calculated at a flat rate of 7.5 per cent of the total booking amount. This includes cleaning fees, GST and booking fees, but generally excludes additional credit card surcharges or third-party fees. Where the booking is made via a booking platform, the Levy will be paid by the booking platform. Similarly, where the booking is made directly through the property owner or tenant, the owner or tenant is liable for the Levy.
Where there is no fee payable for the stay, the short stay will not be subject to the Levy.
What short stays are excluded from the Levy?
The Levy will not apply to bookings made before 1 January 2025, even if the stay is completed on or after 1 January 2025.
The Levy will not apply to a property that is someone’s principal place of residence (PPR), whether that property is owned or leased. However, the Levy will apply to short stays in secondary residences (such as granny flats, caravans and tiny homes) located on the same property as a person’s PPR.
The Levy will also not apply to commercial residential premises within the meaning of the A New Tax System (Goods and Services Tax) Act 1999 (such as a hotel, motel or hostel), and certain employee accommodation, retirement villages and residential care facilities, student accommodation or temporary crisis accommodation.
What action is required?
The Levy is paid using an annual return process.
For short stay accommodation providers who collect booking fees of less than $75,000, Short Stay Levy lodgements must be submitted and paid annually (e.g. for the period ending 31 December).
Where booking fees for the year exceed $75,000, Levy lodgements must be submitted and paid on a quarterly basis (e.g. for periods ending 31 March, 30 June, 30 September and 31 December).
Booking platforms and owners or tenants who accept short stay bookings (regardless of any thresholds) are required to register with the State Revenue Office of Victoria before the due date of the first return.
What happens if the Levy is not paid?
Failure to lodge a return and pay the Levy by the relevant due date will result in a tax default, attracting penalties and interest payable on the unpaid Levy amount.
The owner or renter of a premises may provide a declaration to the Commissioner of State Revenue where their premises are not used for short stay accommodation. However, where it is later found that the premises are used for short stay accommodation, the owner and renter (as well as, in some cases, the booking platform provider) will be jointly and severally liable for the Levy, as well as additional interest and penalty tax.
Implications
Without express prohibitive provisions in the Act, it is expected that short term accommodation providers (in particular, large booking platforms) will pass the Levy on to consumers when booking their stays thereby driving up the prices of short-term stays. Complexities can also arise in respect of accommodation options that are similar to a hotel but do not meet the definition of “residential premises” under the GST legislation.
If you have any questions regarding the Victorian Short Stay Levy, or need advice on how the new Levy will impact your business, please reach out to a Grant Thornton team member today.
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