Like so many places around the world, the southeast Australian state of Victoria is experiencing an affordable housing shortage. And like so many other legislatures, the Victorian Government has responded with new legislation to discourage short-term rentals: specifically, a new 7.5% tax.
Referred to as the Victorian Short-Stay Levy, this tax will apply to booking fees for short stays at Victorian properties and goes into effect on January 1, 2025.
While the rest of the world will be eager to see what impact the levy has on the vacation rental market in Victoria, hosts there have more pressing concerns: How does the new levy work? And what do hosts need to do?
If youâre a Victorian host and have these concerns, this blog post is for you. Keep reading to learn everything you need to know about the Victorian Short-Stay Levy.
What is Victoriaâs Short-Stay Levy?
The Short-Stay Levy is a new tax that will apply to stays of less than 28 consecutive days in Victoria, effective January 1, 2025. The levy will be a flat 7.5% of the total booking amount, including cleaning fees and goods and services tax (GST) where applicable, but excluding credit card fees.
Whatâs included in the levy?
The Short-Stay Levy applies to:
- Stays of less than 28 consecutive days
- Stays in accommodations like entire homes, private rooms (that are not in principal places of residence), apartments, mother-in-law suites, and tiny homes
Whatâs excluded from the levy?
The Short-Stay Levy excludes:
- Stays of 28 consecutive days or longer
- Stays in principal places of residence (PPR), whether owned or rented
- Stays in hotels, motels, and similar establishments
If your vacation rental is excluded from the levy, youâll need to let your booking platforms know so they donât tax you. You can read more about the Short-Stay Levy exclusions here, and then submit your declaration that your rental is not a short-stay accommodation here.
When does the levy go into effect?
Victoriaâs Short-Stay Levy goes into effect on January 1, 2025, and only applies to bookings made and completed on or after this date. Bookings made before this date wonât incur the levy, even if they take place on or after January 1.
Whoâs responsible for paying the Short-Stay Levy?
It depends: For reservations made through third-party booking platforms, the responsibility falls to the platforms themselves. But for direct bookings, the responsibility is all yours.
Here are the specifics.
Reservations through third-party booking platforms
Airbnb
Starting January 1, 2025, Airbnb will automatically collect the 7.5% levy from guests and remit it to the Victorian State Revenue Office (SRO). You donât need to do anything within Airbnb on your end.
Vrbo and Expedia
The Expedia/Vrbo team will be covering the cost of the levy, and will reach out to you directly to confirm that you donât need to do anything within their platforms for now. Please get in touch with Vrbo support if you donât hear from them.
Booking.com
Anyone listing on Booking.com will need to configure the tax on their platform. Please get in touch with Booking.com support if you need assistance.
Reservations through direct booking sites
For any bookings made through your direct booking site, youâll be responsible for paying the tax yourself. Hereâs what you need to know about that process:
- The Victorian State Revenue Office will provide a portal for levy registration starting January 1. Weâll be sure to update this article with a link once the portal is available.
- If your annual booking fees total $75,000 or less, youâll only need to file a single annual return.
- For bookings exceeding $75,000 per year, quarterly returns are required, covering the periods starting January 1, April 1, July 1, and October 1.
- Returns and levy payments must be submitted within 30 days of each periodâs end. Missing the deadline could result in a tax default, so timely filing is essential.
To ensure the levy doesnât cut into your profits, we recommend adding it as a tax within your property management software (PMS). Weâll explain how to do this within Lodgify below.
How the Short-Stay Levy impacts vacation rental hosts
The new Short-Stay Levy is more than just an added costâit signals a shift in how short-term rentals are governed in Victoria. Hereâs what you should consider as a vacation rental host:
- Increased operational expenses: Unless you pass it along to your customers, the 7.5% levy will reduce your profits for direct bookings. For instance, if you charge $250 per night, $18.75 of that will go to the levy. Thatâs money coming out of your pocket.
- Potential impact on bookings: If you do decide to pass the levy along to your customers, your property may appear less attractive, as youâd be advertising the same offerings at a higher rate. Travelers might choose to stay at more affordable alternatives instead, such as vacation rentals whose owners have decided to eat the cost of the levy or hotels, which are excluded from the tax.
- Shifts in market trends: The levy could also have bigger impacts on the Victorian vacation rental market. A significant enough impact on bookings could cause some hosts to close up shop or shift to long-term rentals, reducing the availability of vacation rentals.
How to adjust your strategy for the Short-Stay Levy
Adapting to Victoriaâs new Short-Stay Levy doesnât have to mean losing your edge. Here are some practical steps to help you stay competitive and profitable:
- Revisit your pricing strategy: Evaluate your pricing with the levy in mind. While most vacation rentals will probably pass the levy along to their customers, be mindful of how price-sensitive your guests might be. Research other businesses in the area to find a balance that keeps you competitive.
- Enhance your propertyâs appeal: If you do pass the levy along to your guests, consider implementing some upgrades to make the extra cost worthwhile. You might add some new amenities, throw in an upsell for free, or offer an experience like a tour. These extras can justify a slightly higher nightly rate and attract guests looking for a premium experience.
- Level up your marketing: Guests may be shopping around more now that rates are increasing, so make sure your rental is top-of-mind. Increase your visibility by listing on multiple platforms, optimize your listing with professional photos and compelling descriptions, and leverage social media to reach new audiences. Paid advertising can also help you target potential guests effectively.
- Incentivize stays of 28+ days: Stays of 28 days or more wonât incur the new levy, so why not try to encourage them? Consider offering discounts for stays of this length, which will help you avoid the tax and maximize your occupancy.
- Maximize your tax benefits: With added costs from the levy, itâs crucial to explore every possible tax deduction. Consult a tax professional to ensure youâre claiming eligible expensesâsuch as maintenance, property management, or marketingâand stay informed about any new incentives that could offset the levyâs financial impact.
By staying proactive and adaptable, you can position your business for success despite these new regulations!
How to manage the Short-Stay Levy within Lodgify
As we mentioned above, youâll need to manage the levy independently for any direct bookings for Victoria-based properties. To add the levy to bookings made through your Lodgify site, follow these steps:
- Go to your Main Menu in the top left corner and select Rentals.
- Select the rental that you want to create the fee for, and then select Pricing.
- Scroll down to Taxes. Click + Add and Local tax to add the levy.
- Create the tax with the following settings:
- Local tax type: Lodging Tax
- Value: 7.5%
- Local tax name: Short Stay Levy
- Assign the tax to your rentals in Victoria and click Save.
- If you have additional fees (e.g., cleaning fees), make sure to include this tax in the fee settings.
- If you are connected to Airbnb and/or Vrbo, visit our Knowledge Base for some additional instructions.
- Finally, contact us so we can finalize the setup of the tax.
To learn more and ensure compliance for your business, visit our Knowledge Base.
Note: Since taxes cannot be restricted by a specific number of nights, this levy will apply to all bookings, including those of 28 days or more. Be sure to remove the levy from the quote if you receive bookings of 28 days or more.
Making the most of this new challenge
Unfortunately, regulations are the new reality of managing a vacation rental business in 2024, and Victoriaâs Short-Stay Levy is par for the course. While itâs not ideal, it shouldnât get in the way of you running a successful vacation rental, eitherâas long as youâre prepared.
We hope this blog has answered your questions and helped you get ready for the new levy. Best of luck to Victorian hosts!
