Fine print shows short-stay tax applies to cleaning charges and GST

The controversial tax comes into effect in Victoria on New Year’s Day but there are concerns the levy includes some surprise details.

Holidaymakers and Airbnb owners will be slugged with more charges when the Victorian government’s controversial new short-stay tax kicks off on New Year’s Day because the fine print says it also applies to cleaning charges and GST.

The new 7.5 per cent tax will be applied to all new bookings starting from New Year’s Day, but many operators are still in the dark about the requirements.

Victorian Tourism Industry Council chief Felicia Mariani said the rollout of the new tax had been “confusing” for operators and adding it would be a huge impost on holidaymakers, with costs likely to be passed on.

“With only six weeks from the time the legislation was passed in mid-November to when the levy comes into effect, the industry has really struggled to come to grips with the complexities of the guidelines for collecting the tax,” she said.

Victorian Tourism Industry Council chief Felicia Mariani says the rollout has been confusing.

“It has also come to light through these guidelines that this is not merely a 7.5 per cent tax on the cost of the accommodation.

“This tax is being applied to the total amount collected by the operator for the short stay – including the 10 per cent GST that’s collected on the purchase.

“This means the 7.5 per cent levy will be charged on the cost of the room over the length of the stay, the cleaning fees, any booking or admin fees, fees charged for late check-outs, and on the 10 per cent GST collected on the total.

“As well, if the accommodation operator packages with local producers to provide optional hampers or other experiences in the region, the 7.5 per cent is payable on all of this.

Many operators are still in the dark about the requirements of the Allan government’s new tax. Picture: Andrew Henshaw

“So this is clearly not simply a little tax that will make no difference – it will add considerably to the cost of short-stay accommodation in Victoria.”

The new tax could apply to up to 50,000 Victorian properties, adding a $26 charge for a property costing $350 a night or $182 for the week.

In tourism hotspots like the Mornington Peninsula, where properties have an average overnight stay of closer to $500, the tax will be more like $37 a day – $262 a week.

That’s before GST, cleaning costs and the service fee.

The short-stay levy, which applies a 7.5 per cent tax on all short-stay properties in Victoria, was passed in parliament in November.

The new law will also give local governments the power to regulate short-stay accommodation in their area, including limiting the number of days a property can be made available.

The new levy applies a 7.5 per cent tax on all short-stay properties in Victoria. Picture: AFP

Councils will also be able to enact blanket bans in areas.

The levy applies only to stays shorter than 28 days and will not apply to homeowners leasing their principal residence for a short stay.

The new charge is predicted to generate about $60m a year, which will go to the government’s social housing agency, Homes Victoria.

A Victorian government spokesman said the levy would encourage investors to return properties to the long-term rental market.

“This will unlock more homes for real rentals and unlock more funding for social housing,” they said. “This is an important step towards making more properties available for long-term rental – and giving Victorian families more opportunities to find a home.”

But deputy Liberal leader Sam Groth hit back, saying the tax was just adding to the strain on Victorians.

“During a cost-of-living crisis, the last thing Victorians need is another tax hit on holidays and weekends away,” Mr Groth said. “Every dollar spent on Labor’s Airbnb tax is one fewer going into Victoria’s tourism sector, which supports local jobs and communities across the state.”

Originally published as Fine print shows short-stay tax applies to cleaning charges and GST