The winds of change are blowing for property investors in the realm of short-term rentals. If you’ve capitalized on the short-term rental trend or have been keeping your properties vacant, there’s an upcoming tax shakeup that’s worth your attention.
The Victorian Government has recently announced Australia’s premier short-stay property tax, set to come into effect on 1 January 2025. Expected to bolster the state’s revenue by over $70 million annually, the Short Stay Levy will impose a 7.5% tax on the revenue of short stay platforms. To break it down, if you list a property in Melbourne for a short stay at $850, the additional tax will bring the total to $913.75.
Here are some key takeaways:
- Scope of the Tax: As per the government’s statement, Victoria boasts over 36,000 short-stay accommodations, nearly half of which are in regional Victoria. A staggering 29,000 of these accommodations are entire homes.
- Industry Response: Airbnb’s ANZ Country Manager, Susan Wheeldon, counters that short-term rentals in Victoria represent a minuscule fraction of the overall housing stock. She contends that the housing challenges predate Airbnb, suggesting this tax might not be the long-term solution.
- Ripples of Change: Property investors across Victoria are gearing up for potentially similar taxes at either local or state levels. Notably, this announcement follows other tax changes, including a land tax surcharge and an adjustment to the absentee owner surcharge rate.
- International Perspective: While ‘bed taxes’ aren’t uncommon worldwide, what stands out about Victoria’s approach is its exclusive focus on one form of tourist accommodation. The 7.5% rate is also on the higher side compared to international standards.
- Regulatory Moves: Around the globe, the notion of taxing vacant and short-term rentals isn’t revolutionary. British Columbia has seen success with its Underused Housing Tax, while cities like New York, Amsterdam, Paris, and San Francisco have set limits on short-term rental days.
- The Larger Debate: Does restricting Airbnb actually alleviate rental scarcity? Professor Nicole Gurran of the University of Sydney weighs in, suggesting that while Australia’s regulatory approach has been relatively relaxed to support tourism, the current housing crisis necessitates a more robust strategy.
So, what’s the bottom line for investors and rental property owners? Governments worldwide are recognizing the burgeoning short-term rental market as a potential revenue source. The exact nature and impact of these regulations will largely be dictated by individual states and territories. However, one thing is clear: the balancing act between capitalizing on short-term rentals and ensuring long-term housing availability is set to continue.