The ‘Airbnb’ Tax

Property investors that choose to utilise their property for short-term stays (or leave it vacant) are firmly in the sights of the regulators.

The Victorian Government’s recent Housing Statement announced Australia’s first short-stay property tax. The additional tax, which is scheduled to come into effect from 1 January 2025, is expected to generate $70 million plus annually. The Short Stay Levy will be set at 7.5% of the short stay accommodation platforms’ revenue – so, a few days in Melbourne at $850 will cost an extra $63.75 taking the stay to $913.75.

According to the statement there are more than 36,000 short stay accommodation places – with almost half of these in regional Victoria. More than 29,000 of those places are entire homes.

Airbnb’s ANZ Country Manager Susan Wheeldon however says that “short-term rentals in Victoria make up less than one percent of total housing stock. Acute housing issues existed long before the founding of Airbnb, and targeting these properties is not a long term solution.”

Property investors are now braced for an onslaught of similar taxes at either the local Government or State level.

For Victorian investment property owners this comes after a temporary land tax surcharge from the 2024 land tax year and for those keeping a property vacant, an increase to the absentee owner surcharge rate from 2% to 4% including a reduction in the tax-free threshold from $300,000 to $50,000 (for non-trust absentee owners).

Some local Government taxes on Airbnb style accommodation will be removed once the new tax comes into effect.

Some Councils already impose a surcharge on short stay accommodation. Brisbane City Council for example imposed 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 increase it to 65% in 2023-24.

What happens overseas?

Bed taxes in some form are not uncommon internationally but it is unusual to isolate one form of tourist accommodation from another as the Victorian Government have chosen to do. Also unusual is the 7.5% rate – many local taxes on short stay accommodation are in the 5% range (despite California’s Transient Occupancy Tax of up to 15% depending on the region you are staying).

Globally, the idea of taxing vacant and short-term accommodation is also not new.

In British Columbia, the Underused Housing Tax – a 1% tax on the ownership of vacant or underused housing introduced from 1 January 2022 – has been credited with increasing the rental stock by up to 20,000 properties.

Taking the alternative route to freeing up rental stock, New York introduced new rules in September 2023 that severely restrict Airbnb style accommodation options. Hosts need to register with the city if they offer accommodation for less than 30 consecutive days (unless their building is exempt as a hotel or accommodation establishment). Under the new rules the host must permanently reside in the property – entire properties will no longer be available – and, only two guests are allowed. The platforms are responsible for monitoring and enforcing compliance with the new rules.

New York is not alone in curbing the rise of short-term rentals. Amsterdam, Paris and San Francisco limit the number of days in a year an entire residence can be listed – between 30 and 90 days.

Closer to home in Byron Bay, the Byron Bay Council will limit “non hosted holiday letting to 60 days per year for most of the Shire” from 23 September 2024.

But do restrictions on Airbnb create rental stock?

According to Professor Nicole Gurran, from the University of Sydney’s School of Architecture, Design and Planning, if Australia is serious about controlling short-term rentals to solve Australia’s long-term rental crisis, then more needs to be done.

“In comparison to much of the international regulation of the short-term rental market, Australia is very “light touch”. The overarching aim is to encourage the tourism economy.

While this might have been appropriate five years ago when the rental market was in better shape, and long-term housing demand focused on inner city areas, the current crisis demands a new approach. Regulations must be tailored to the conditions of local housing markets, rather than the one-size-fits-all approach that exists today,” Professor Gurran says.

In a 2017 study, Professor Gurran and Professor Peter Phibbs found that, Airbnb absorbed 7% of stock in one Sydney municipality.

So, where is all this going? Governments are unlikely not to take advantage of the opportunity to share in what has become a lucrative short-term rental market. What that looks like will really depend on the States and Territories. Beyond revenue, further regulation is likely to ensure that private gain from short-term rentals is not at the expense of supply of long-term accommodation.

Note: The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

Schedule a consultation with a business expert.

Get expert advice

At Latter Kennedy, we do more than just financial services and tax returns. Schedule an obligation-free consultation and let us help you to get back on track to achieving your accounting, business and taxation goals.

Schedule a Consultation
lk images 87
View all Insights
  • pexels andrey belavin 71368084 8412268 e1738826367917

    Fuel Tax Credits Rate Change – 3 February 2025

    Fuel Tax Credit rates can change regularly. It is important that you ensure you are using the correct rates when calculating your fuel tax credits dependant on the date the fuel was purchased. Current fuel tax credit rates are as follows: Rates for fuel acquired from 3 February 2025 to 30 June 2025 Eligible fuel typeUsed in heavy vehicles for…

    Taxation
  • Tax deduction denied for signature basketball shoe R&D

    The Federal Court has denied a sports company’s appeal to claim research & development incentives for the creation of an Australian signature basketball shoe. The Movie Air highlighted the importance of the signature Air Jordan shoe to Nike. While expected to sell around $3 million worth of shoes by its fourth year, the signature shoe eclipsed expectations raking in $126…

    Taxation
  • Phasing out cheques

    The Government has announced a transition plan to phase out the use of cheques. Under the plan, cheques will stop being issued by 30 June 2028 and stop being accepted on 30 September 2029. The use of cheques has declined dramatically over the last 10 years, declining by around 90%. In response, banks have stopped issuing chequebooks to new customers.…

    General News
View all Insights