Navigating the Potential 7.5% Levy on Short-Term Rentals in Victoria, Australia

Please note, the information below is accurate at the time of writing this article, in Oct 2023.

According to the website Inside Airbnb, which provides data about the short-term rental platform’s impact on residential communities, there are 23,185 Airbnbs in greater Melbourne, 7,050 in the Barwon South West region and 4,721 in the Mornington Peninsula - and they would all get affected by the potential new regulation for hosts.

What is the proposed 7.5% levy on Airbnb prices in Victoria, Australia?

The Victorian government is currently considering a groundbreaking proposal to introduce a 7.5% levy on short-term accommodation provided by platforms like Airbnb.

This levy, aimed at consumers, could potentially contribute a substantial $42 million annually to the state's revenue. While this proposal is still under review, it's essential for hosts to understand its implications and be prepared for any potential changes.

How will the potential levy impact short-term rental prices?

If implemented, this levy could lead to an increase in short-term rental prices. On average, it might add approximately $17 per night to rentals in metropolitan Melbourne, $29 in Barwon South West, and $42 on the Mornington Peninsula.

What It Means for Airbnb Hosts in Victoria:

If this levy is implemented, hosts in Victoria can expect some notable shifts in their hosting dynamics:

Price Increase:

On average, this levy could add around $17 per night to a short-stay rental in metropolitan Melbourne, $29 in Barwon South West, and $42 on the Mornington Peninsula. Hosts should factor in this potential price increase when setting their rates.

Competitive Challenges:

Airbnb Australia New Zealand’s head of public policy, Michael Crosby, has voiced concerns that a 7.5% levy may give traditional hotels an advantage and deter tourists. Hosts may face increased competition from hotels, which could affect booking volumes.

Regulatory Environment:

With this levy, it's evident that the short-term rental industry is facing increased scrutiny and regulation. Hosts may need to adapt to evolving rules and requirements, such as tax reporting or compliance with new regulations.

What are the concerns raised by industry stakeholders regarding the proposed levy?

Industry stakeholders, including Airbnb, have expressed concerns about the proposed 7.5% levy. They believe it is too high and could negatively affect the competitiveness of short-term rentals when compared to traditional hotels.

What do the members of the government say?

The government's stance on the proposed 7.5% levy on Airbnb prices in Victoria is complex, reflecting the diversity of opinions on this matter.

While the Victorian Greens leader, Samantha Ratnam, supports the levy, she emphasizes the need for accompanying regulations, including a 90-day cap on short-stay listings. She argues that stringent regulations would encourage property owners to make their homes available for long-term rentals or owner occupation, addressing the pressing need for increased rental supply.

Ratnam also points out that similar caps are in place in various international cities, such as Sydney, London, and San Francisco, suggesting that they have been effective in managing the short-term rental market. On the other hand, the opposition's spokesperson for tourism, Sam Groth, opposes the levy, labeling it a "tourism and holiday tax."

Groth believes that hardworking Victorians should not bear the burden of additional taxes and suggests it may hinder investment in the state. Meanwhile, the government's official response acknowledges the significance of housing as an issue but remains focused on developing a comprehensive housing package, promising further details in the near future.

Is there an alternative suggested levy rate?

Airbnb Australia New Zealand's head of public policy suggests that a levy between 3% and 5%, in line with international policies, would be more appropriate than the proposed 7.5% rate.

How might this levy impact the tourism industry in Victoria?

There are concerns that a high levy could deter tourists from choosing Victoria as a destination, potentially affecting tourism revenue in the region.

Worth keeping these in mind if you’re a host:

While this proposed levy may raise concerns among hosts, it's crucial to maintain a balanced perspective. Here are some key considerations:

Adaptability:

Hosts have consistently shown their ability to adapt to changes in the industry. While this levy may pose challenges, hosts can adjust their pricing strategies and service quality to remain competitive.

Collaborative Advocacy:

Airbnb and other industry stakeholders are actively engaged in discussions with the government. Hosts can consider participating in these conversations to ensure their voices are heard and their concerns addressed.

Diversify Income Streams:

Diversifying your income sources, such as offering long-term stays or exploring other platforms, can help mitigate the potential impact of this levy.

About us - KeyNest

KeyNest provides Airbnb hosts with a network of secure and reliable local Points (stores, cafes, petrol stations) to automate their guest and contractor key collections and drop-offs. We have recently expanded to 17 new locations around Melbourne, and are adding more every week!

We offer a web platform or mobile app that can be used to track and exchange keys remotely, and the host will always get informed while the key is moved. For the key to be collected, a guest or a contractor needs to provide a secure 6-digit collection code, which makes the whole process safe, but also extremely simple.