The Short-Stay Levy Act and its impact on Owners Corporations

The Short-Stay Levy Act and its impact on Owners Corporations

The Short Stay Levy Act 2024 (Vic) (SSLA) came into effect on 1 January 2025. The SSLA, among other things, introduced a 7.5% levy on short-term rental accommodation bookings in Victoria through platforms such as Airbnb, Stayz and Booking.com. More importantly, it amends the Owners Corporations Act 2006 (Vic) (OCA) to allow owners corporations (OCs) to make rules prohibiting the use of lots for short-stay accommodation (defined as continuous rental periods of less than 28 days). The levy is part of the Victorian Government’s response to housing affordability concerns, ensuring short-stay accommodations contribute to local infrastructure and community services. However, for OCs, the most significant change is their new authority to regulate and prohibit short-stay rentals within their developments.

What does this mean for OCs?

Rule-Making Authority:

OCs now have the power, pursuant to Schedule 1 of the OCA, to introduce rules banning short stay accommodation within their subdivision.  This amendment grants OCs wider authority over the use of lots and the ability to further manage potential disruptions caused by short-stay rentals.

Special Resolution Requirement

If an OC wishes to prohibit short-stay rentals and amend the registered rules, it must pass a special resolution in accordance with s 138 of the OCA. By virtue of s 96, this requires:

• 75% of lot owners voting in favour, or
• 75% of total lot entitlements if voting by ballot.

OCs should also note the interim special resolution requirements (if applicable) pursuant to s 97 of the OCA.

Enforcement & Penalties:

OCs may enforce these rules and apply to the Victorian Civil and Administrative Tribunal (VCAT) to impose penalties on non-compliant lot owners (s 166 of the OCA) and more particularly in relation to short-stay accommodation (s 169G of the OCA).

Exceptions

OCs should note however, a blanket ban on short-stay rentals is not permitted. The prohibition cannot apply where a lot owner, or occupier uses the lot as their principal place of residence but wishes to rent out a room or, the entire lot while temporarily away.

OCs considering a prohibition should carefully assess these exceptions before introducing new rules.

If adopting such rules, OCs should liaise with lot owners and/or occupiers who have preexisting bookings or short-term rental arrangements when the prohibition is adopted to ensure a smooth transition.

Local Council

OCs should also consider local council regulations and planning laws before implementing rules prohibiting short-stay accommodation. Local government rules may already regulate or restrict short-stay rentals, and OCs should ensure no inconsistencies exist between their rules and local government laws.

Understanding ‘Principal Place of Residence’

A key issue for lot owners is whether their property qualifies as a principal place of residence (PPR) under s 10 of the SSLA. While the OCA does not define what constitutes a PPR, s 5(4) of the SSLA outlines the criteria as follows:

“…(a) in determining whether premises are the principal place of residence of a person, regard must be had to every place of residence of that person, whether in Victoria or elsewhere; and

(b) premises are taken not to be the principal place of residence of a renter if, in the Commissioner’s opinion, the residential rental agreement for the premises is made for the purposes of avoiding payment of the short stay levy.”

Other Victorian legislation, such as the Land Tax Act 2005 (Vic), also considers factors like the length of occupation, the owner’s intent for the property, and whether the owner receives rental income when determining PPR status.

Lot owners should carefully assess their circumstances to determine whether they are subject to the levy and if they are exempt from any rules made by OCs prohibiting the use of lots for short-stay accommodation.

Comparison with New South Wales

Similarly, by virtue of s 137A of the Strata Schemes Management Act 2015 (NSW), OCs in NSW may make a by-law by special resolution to prohibit a lot being used for the purpose of a short-term rental arrangement if the lot is not the PPR of the provider of the short-term rental arrangement. The by-law has no effect if it prohibits a lot from being used as short-term accommodation if the lot is the PPR of the provider of the short-term rental accommodation.  There is also no definition of PPR in the Strata Schemes Management Act 2015 (NSW). Conversely, NSW limits short-term rentals in particular circumstances to 180-night per year in certain areas and mandatory property registration under the Fair Trading Amendment (Short-term Rental Accommodation) Act 2018 (NSW).

What Actions Should Owners Corporations Take?

• Assess whether this new prohibition is relevant or necessary

A prohibition may not be suitable for all developments. Buildings that cater to short-stay accommodation may find such restrictions unnecessary or even detrimental to their community.

• Review

OCs should review local government planning laws and regulations before adopting any prohibition to ensure there are no conflicts between OC rules and council laws.

• Seek Legal Advice

If an OC is considering imposing restrictions on short-stay rentals, it is essential to ensure that these rules comply with the OCA and that a consolidated copy of the amended rules is lodged with the Registrar.

• Educate Lot Owners

OCs should ensure lot owners understand the implications of a prohibition and their rights and obligations under new rules.

Final Thoughts

The introduction of the SSLA marks a significant shift for owners corporations and lot owners. While the levy itself is a state-wide policy, the ability for OCs to regulate short-stay rentals is a major development in Victoria’s OC space.

OCs should take a proactive approach and review their rules and governance policies and educate lot owners on their responsibilities under the OCA and the amendments under the SSLA.

If your OC, or an OC you manage, wishes to amend its registered rules to include this prohibition, please contact our office for guidance.

— Justine Nguyen, Solicitor and Monifa Kabylakis, Associate VIC

© Bugden Allen Group Legal Pty Ltd. This is general information only and not legal advice. You should not rely on this information without seeking legal advice tailored to your specific circumstances.