Owners of short-stay rental properties are bracing themselves to transfer the burden of new taxes onto consumers as new regulations in Victoria take effect on January 1. For many property owners in the region, these last-minute changes to short-stay accommodation rules and the accompanying taxes have come as an unexpected holiday dilemma.
However, holiday home proprietors will have ample opportunity to adjust their pricing to account for these costs, which may ultimately affect renters and vacationers alike. In a significant legislative move, the Victorian government introduced a 7.5 percent short-stay accommodation tax in October 2023, which is set to be implemented at the start of the new year. Voices within the tourism sector have expressed concerns regarding the clarity of these new taxes.
Notably, a critical aspect of the adjustments—that the 7.5 percent tax also applies to cleaning fees and Goods and Services Tax (GST)—had not been widely recognized until recently. Airbnb hosts are particularly poised to directly pass this increase onto their guests. For instance, a listing for a property in Sorrento, located on Melbourne’s picturesque Mornington Peninsula, clearly communicates the change: “Book your 2025 stay before 1/1/25 to avoid the new 7.5 percent state tax,” highlighting proactive steps taken ahead of the tax’s enforcement. The Mornington Peninsula has experienced a notable decline in rental availability, seeing a reduction that resulted in a vacancy rate of just over 2 percent in July 2023.
Currently, SQM Research reports a decline to a mere 1.1 percent vacancy rate in the area. The newly enacted Victorian tax laws empower local councils to impose restrictions on the number of days properties can be rented out or to prohibit short-term rentals altogether. However, exemptions are provided for individuals renting their primary residence and for established accommodations such as hotels, motels, and caravan parks. In announcing these reforms, the government emphasized its intention to increase the availability of long-term rental properties.
“It is crucial that we signal our priorities to the market, especially the need for secure housing and long-term rental accommodations,” stated Tim Pallas, the state’s former Treasurer. Despite these assertions, Jordan van den Lamb, a Senate candidate for the Victorian Socialists, has expressed skepticism regarding the effectiveness of the new laws in alleviating housing shortages.
“We have made it clear that this levy will not contribute to easing our housing crisis. Investors are simply shifting the financial burden to consumers,” he remarked in a conversation with NewsWire. Mr. van den Lamb has gained traction as a proponent for renters’ rights, advocating for those facing inadequate living conditions and highlighting the number of homes in Melbourne that remain empty for extended periods.
He criticized local governments for shifting the responsibility of housing solutions, emphasizing the increasing homelessness crisis in Australia: “The number of homeless individuals grows by 10,000 every month. This is a conscious policy choice, and the Labor Party has made its position evident.” Felicia Mariani, chief of the Victorian Tourism Industry Council, remarked to the Herald Sun that many operators were taken aback to learn that the 7.5 percent tax encompassed GST and cleaning fees. “With just six weeks from the legislation’s passage in mid-November to its enactment, the industry has struggled to navigate the complexities of tax collection,” she explained.
The bill was approved by parliament on October 17 and was formally enacted on October 29. Ms. Mariani underscored the significance of these tax changes, noting, “This levy is not a trivial tax; it will substantially increase the costs associated with short-stay accommodations in Victoria.
