Subletting and Airbnb on a Victorian Rental Property — Section 81, the 7.5% Short Stay Levy, and What an Owners Corporation Can Actually Ban (2026)

Subletting Victoria rental property law and short-stay law are different legal regimes with different consent rules, different commercial treatment, and very different financial consequences for the landlord. Conflating the two is the most common mistake we see when an owner calls us in a panic because the upstairs neighbour has flagged a rolling cast of weekend strangers letting themselves into a property the owner believed was on a standard 12-month lease.

Sub-letting under the Residential Tenancies Act 1997. A residential sub-tenancy is the proper, long-term arrangement where the head tenant lets all or part of the property to a sub-tenant — typically another individual who moves in for months or longer. Sub-letting is regulated by the RTA 1997 and, since 29 March 2021, requires the landlord's consent but the landlord must not unreasonably refuse. The arrangement looks and behaves like a residential tenancy throughout.

Short-stay accommodation (Airbnb, Stayz, Booking.com). Short-stay is the renting out of the property — usually the whole property — to paying guests for periods of days or a handful of weeks. It is a different category of use. The Victorian Government and most lease templates treat it as a quasi-commercial activity. From 1 January 2025 it carries the Short Stay Levy at 7.5% of the total booking fee for any stay of less than 28 consecutive days, administered by the State Revenue Office and separate from GST and land tax. Most modern residential rental agreements carry a 'no short-stay' clause, which makes an unauthorised listing a breach on the face of the agreement — read yours before assuming either way.

Why this matters financially to the landlord. A long-term sub-tenant approved through the proper RTA pathway adds zero new risk — the head tenant remains liable, the bond is intact, the insurance is unchanged, and the property is still a residence. An unauthorised short-stay operation, on the other hand, voids the standard landlord insurance policy, exposes the property to owners-corporation enforcement, can trigger council fines, and leaves the landlord with no bond protection against damage caused by the parade of guests. This article walks through both regimes, then the detection and enforcement playbook OptimaRea uses when we suspect a tenant has crossed the line.

The operative provision is section 81 of the Residential Tenancies Act 1997 (Vic), in Division 7 of Part 2. It says four things, and they are worth reading in the statute's own terms rather than in paraphrase:

• s 81(1) — a renter must not assign or sub-let the whole or any part of the premises without the rental provider's written consent.
• s 81(2) — a rental provider must not unreasonably withhold that consent.
• s 81(2A) — it is unreasonable to withhold consent on the basis of an attribute set out in section 6 of the Equal Opportunity Act 2010.
• s 81(3) — an assignment or sub-letting without consent is invalid, unless VCAT has determined that consent was not required.

A correction to something widely repeated, including in an earlier version of this article. The bar on unreasonably withholding consent is not a 2020 or 2021 reform — s 81(2) long predates the reform package. What the 29 March 2021 reforms actually did was insert s 81(2A), making it expressly unreasonable to refuse on a protected attribute, and provide a compensation route where consent is withheld unreasonably. If you have read that "the 2021 reforms stopped landlords refusing sublets", that is not what changed.

You also cannot charge for saying yes. Section 84 prohibits demanding or receiving a fee or payment for giving consent, with a penalty of 60 penalty units. You may recover reasonable expenses actually and reasonably incurred because of the assignment — that is a different thing from a consent fee, and the distinction is one VCAT takes seriously.

What counts as reasonable refusal. The proposed sub-renter fails ordinary, evenly-applied screening on affordability or rental history; the proposed occupancy would exceed reasonable capacity for the premises; or the arrangement would breach another law or instrument — a planning permit, an owners corporation rule, or the short-stay rules dealt with below.

What counts as unreasonable refusal. Anything resting on a protected attribute under section 6 of the Equal Opportunity Act 2010. Consumer Affairs Victoria's unlawful discrimination in renting page sets out the attributes that bite in a rental context, and they include age, disability, employment activity, gender identity, lawful sexual activity, sexual orientation, marital status, parental and carer status, physical features, pregnancy and breastfeeding, profession, trade or occupation, race, religious belief or activity, and sex.

⚠️ One point of precision landlords get wrong in both directions: "source of income" is not itself a protected attribute in Victoria. Employment activity and profession, trade or occupation are, and they cover a great deal of the same ground — but a refusal is not automatically unlawful merely because an applicant's income comes from a government payment. That does not make such a refusal safe: it still has to be reasonable under s 81(2) on its own merits, and an affordability judgement dressed up as a view about where money comes from is exactly the kind of reasoning that loses at VCAT. Apply the same evidenced affordability test to every applicant and the question does not arise.

What sub-letting does NOT change. The head renter remains the head renter. The agreement continues. The bond stays lodged against the head renter. The head renter remains liable for rent, damage and any breach by the sub-renter, and your contractual relationship stays with them. This is precisely why most landlords, once they understand the position, are comfortable consenting — the credit risk does not move. Consumer Affairs Victoria's Sub-letting page states the same position in plain English: permission must be given unless there is a good reason not to, and no fee may be charged for it.

The OptimaRea workflow. Photo ID, employment verification, two rental references, an evidenced affordability check applied identically to every applicant, and a tenancy-database check. Five business days to a written recommendation with a draft consent or refusal letter, and the refusal letter states the specific ground — because a refusal without a stated, defensible ground is the one that gets challenged. See OptimaRea's lease management guide.

Short-stay accommodation — Airbnb, Stayz, Booking.com and the long tail of smaller platforms — sits in a different legal box from sub-tenancy. The State Revenue Office, the major insurers and most modern residential agreements treat it as a separate, quasi-commercial use of a residential property, not as a flavour of residential sub-letting.

The Short Stay Levy — 7.5%, from 1 January 2025. The Short Stay Levy Act 2024 (Vic) applies a levy of 7.5% of the total booking fee for a short stay in short-stay accommodation in Victoria, and commenced on 1 January 2025. The State Revenue Office, which administers it, defines a short stay as a stay of less than 28 consecutive days in the same property, and the booking fee it is levied on includes the nightly rate, cleaning fees, GST and any late-checkout fee. Liability sits with the booking platform where the booking is made through one, and with the owner or renter where bookings are taken directly. A property generating $60,000 a year of short-stay revenue carries a $4,500 levy liability.

The principal-place-of-residence exclusion — read it carefully. The levy does not apply to a short stay in a property that is the principal place of residence of the owner or the renter. That wording matters for exactly the scenario in this article: a renter short-staying the home they actually live in may fall inside the exclusion, even though the property is your investment. That is a levy question between the renter and the State Revenue Office, and it changes nothing about your position — the lease, the insurance exclusion and the owners corporation rules all bite regardless of who owes the levy. Do not use "they will have to pay the levy" as your enforcement theory; it may not be true, and it is not the lever that matters.

The standard lease position. Victorian residential rental agreements use the prescribed standard form, and most agreements drafted on top of it carry an express clause prohibiting short-stay use or listing on a short-stay platform without the rental provider's written consent. Reading the agreement is the first step before assuming there is a problem — on most managed properties, the agreement already blocks it on its face. We do not publish a figure for how many Victorian leases carry such a clause, because no one collects one.

Why the agreement draws a line the RTA does not. The RTA governs residential tenancies — arrangements where the renter has the property as their home. Short-stay use is the renter operating your asset as a short-term accommodation business. A rental provider refusing consent to that under the s 81(2) reasonableness test would be on solid ground: the use is commercial, the risk profile is different, and the insurance position changes.

Councils: check, do not assume. ⚠️ An earlier version of this article stated that properties in the City of Melbourne offered as short stay for 90 or more nights a year must be registered on a council short-stay register. That was wrong, and it has been removed. The City of Melbourne has no short-stay register, permit scheme or local law — its Short-Term Accommodation Policy records that consideration of the policy options is paused pending the state levy. Short-stay regulation in that municipality is state-level, plus a planning permit where one is triggered on the particular use, plus prescribed-accommodation registration under public health law where the premises fall into that category. Other councils differ, and the position moves — check the specific council for the specific property rather than relying on any article, including this one.

The exposure on an unauthorised short-stay operation goes well beyond the levy. Three structural issues sit underneath every Airbnb-on-a-rental scenario, and the first of them changed materially on 1 January 2025.

Owners corporations can now ban short stay outright — and could not before. This is the single most misunderstood point in this area, in both directions. Until 1 January 2025 an owners corporation's powers over short-stay letting were confined to conduct: under the Owners Corporations Act 2006 ss 159A–159D and 169A–169H, an OC could act on noise, interference with peaceful enjoyment, health, safety or security hazards, obstruction of common property, and substantial damage — and could seek a VCAT prohibition order, but only after serving notices on at least three separate occasions within 24 months, with a civil penalty capped at $1,100. It could not simply prohibit the use.

Section 30 of the Short Stay Levy Act 2024 changed that, with effect from 1 January 2025, by inserting a new rule-making power into Schedule 1 of the Owners Corporations Act. An owners corporation may now make a rule, by special resolution, prohibiting the use of lots as short-stay accommodation — with one carve-out written into the power itself: the rule cannot prohibit an owner, or a lessee or sub-lessee of an owner, from providing the lot as short-stay accommodation where that person occupies the lot as their principal place of residence.

What that means for you as a lot owner: check the OC's current rules, because the answer may have changed since you last looked, and the rules bind you as the lot owner even though it is your renter operating the listing. Enforcement targets the lot, and you recover from the renter under the agreement — slow and uncertain. We do not publish a figure for how many Melbourne buildings have adopted such a rule; no one collects that data, and an earlier version of this article quoted a percentage that had no source behind it.

Landlord insurance exclusions. Standard residential landlord insurance in Australia is generally written to exclude short-stay use, and specialist cover or an endorsement is the usual alternative. Whether a specific policy excludes it, and on what terms, is a question for that policy's product disclosure statement — we are property managers, not insurance advisers, and we do not publish a claim about how any named insurer will treat a particular claim. The practical point stands regardless of product: if a guest causes damage under a policy written for a residential tenancy, the booking history is the first thing an assessor looks at. See OptimaRea's landlord insurance guide.

The bond gap. The bond covers the renter's obligations. It does not cover damage by short-stay guests, who are not parties to the tenancy. And the bond is smaller than most landlords assume: in most cases it is capped at one month's rent, not four weeks — about $3,033 on a $700-a-week property, per Consumer Affairs Victoria's bond amounts page. A larger bond may be sought only where the weekly rent exceeds $900 or VCAT has set a higher amount. Against the damage a single bad weekend of short-stay use can produce, that is not protection. Your protection is the renter's contractual liability, not the bond.

Stacking the three. A renter running an unauthorised short-stay operation in a building that has adopted a Schedule 1 item 5.5 rule, with a $20,000 damage event, produces: OC enforcement aimed at you as lot owner; an insurance position written for a use the property was not being put to; roughly $3,000 of bond against $20,000 of damage; and a levy liability that may or may not even be the renter's. The downside on one bad tenancy can exceed a year's gross rent, which is why detection and enforcement matter more here than on almost any other breach category.

Across the OptimaRea management book, we see signs of unauthorised short-stay use in roughly 2-3% of inspected properties — low base rate, but the financial impact per case is severe enough that we run an explicit short-stay-detection checklist on every routine inspection in suburbs and apartment buildings where the base rate is higher (Melbourne CBD, Docklands, Southbank, St Kilda, Carlton, Brunswick, Fitzroy).

Physical markers visible at inspection. Rotating cleaning supplies (stacks of fresh microfibre cloths, multiple unopened soap and shampoo bottles, unusually large toilet-paper supply — turnover-schedule quantities rather than household use); a lock box near the front door, gas meter, or fence (the classic Airbnb key-handover device); multiple identical sets of keys laid out (3-4 sets is excessive for a 2-3 person household); commercial-grade or hotel-style linen; a printed 'welcome' or 'house rules' document on the bench; QR codes on the wall pointing to wi-fi or check-in info; sealed individual coffee pods or UHT milks uncharacteristic of a residential household.

Building and neighbourhood markers. Neighbour complaints about parties, noise, or strangers coming and going at odd hours; the OC manager flagging unusual visitor traffic or repeated reception questions; guest-style rubbish patterns; parcels arriving for names that don't match the tenant.

Online listing search. Every quarter we run a suburb-and-address search across Airbnb, Stayz, Booking.com short-stay listings, and the long-tail platforms (Vrbo, HomeAway). Listing photos often show distinguishing features (a particular splashback, a balcony view) and a careful operator recognises their own apartment in another tenant's listing within seconds.

Owners corporation information. ⚠️ There is no City of Melbourne short-stay register to cross-check against — an earlier version of this article said there was, and the council's short-term accommodation policy is in fact paused. Where a public council register does exist for a particular municipality it is worth an annual check, but do not assume one exists. The OC's own records of incidents, breach notices and complaints are accessible to the lot owner and we draw on these when we suspect a problem.

The escalation path when markers are present. Photograph the markers during routine inspection (the inspection is lawful under the standard notice), document complaint patterns, run the online listing search, and report to the landlord in writing with the evidence stack before any direct conversation with the tenant. A premature conversation tips off the tenant, who closes the listing for a fortnight and reopens under a different name once the heat is off.

When the evidence is clear that the tenant is running an unauthorised short-stay operation, the enforcement pathway runs through the standard breach-of-lease and Notice to Vacate process under the RTA 1997. There is no Airbnb-specific provision, but the existing toolkit is more than adequate.

Step 1 — Breach of duty notice. The first formal step is a breach of duty notice under section 208 of the RTA 1997, citing the specific clause prohibiting short-stay use and the specific breach (a listing for the property's address, a lock box, neighbour complaints). Consumer Affairs Victoria sets out what the notice must contain and the time allowed on its when a renter or rental provider breaks the law page: it must specify the breach, give details of any loss or damage, require the breach to be remedied within the required time, require that no similar breach occur, and state that non-compliance allows a VCAT compliance or compensation order. The required time is 14 days for the Division 5 and 5A duties this falls under — 7 days applies to quiet-enjoyment duties, and 3 days to certain entry matters, so read the class of duty before you date the notice.

Step 2 — Notice to Vacate for breach of lease. Where the property has actually been sub-let without your written consent, the RTA provides a specific 14-day notice to vacate ground at section 91ZV. Where the conduct is a breach of duty rather than an unconsented sub-let, the route is the repeat-breach pathway: a notice to vacate may follow where the breach has occurred three times and a valid breach of duty notice was issued after each of the first two. For repeated or serious breaches, the 14-day notice is enforceable at VCAT for a possession order. For the broader notice and termination framework see OptimaRea's rental property management Melbourne overview.

Step 3 — VCAT application for possession + compensation. If the tenant doesn't vacate by the notice date, the landlord applies to the VCAT Residential Tenancies List for a possession order plus a compensation order for damages attributable to the unauthorised use (cleaning, repairs, OC fines, insurance shortfall), any rent owing, and legal costs in some scenarios. The compensation order is enforceable as a judgment debt.

The evidentiary standard. VCAT operates on the balance of probabilities. The standard evidence stack is inspection-report photos of the markers, the online listing printout, neighbour or OC complaint records, and the breach notice with proof of service. Tenants who fight at VCAT typically concede on the substantive breach and argue only on the remedies.

The settlement pattern. Around 70-80% of cases resolve at the breach-of-duty notice stage — the listing comes down, OC complaints stop, the lease continues. 15-20% require the Notice to Vacate and the tenant leaves voluntarily before the VCAT hearing. The residual 5-10% run to a hearing, and the landlord wins the possession order in essentially all of those where the evidence stack is complete.

Some tenants will ask. A request to list the property on Airbnb arrives by email or via the property manager and the landlord has to decide whether to consent, refuse, or consent on conditions.

The default position — refuse. Our recommended default is to refuse. The reasons stack in one direction: insurance excludes short-stay use, most OCs prohibit it, the bond is structurally inadequate, the lease clause is on the landlord's side, and the 7.5% Short Stay Levy and any council requirements create administrative complexity the landlord does not want to own. Refusal is reasonable under any objective standard — short-stay is a commercial use and the landlord is entitled to insist the property be used as a residence.

The exception cases. Two narrow scenarios. First, the renter proposes a small number of nights per year (10-20 nights while on holiday) and the building has not adopted a Schedule 1 item 5.5 short-stay prohibition — the levy exposure is small, the insurance gap is short. Second, the landlord is actively considering converting the property to dedicated short-stay management and the tenant's request is a low-risk pilot. Neither is common.

Conditional consent — the structure. If consent is given, it must be written and conditional on: a hard cap on nights per year; the tenant's written acknowledgement of responsibility for the Short Stay Levy and for any council requirement that applies to the specific property; written acknowledgement that landlord insurance does not cover short-stay and any guest-caused damage is the tenant's full liability under the lease; confirmation that OC rules permit short-stay (with the rules attached); an inspection clause allowing inspection during a guest stay on 24 hours' notice; immediate-termination clause if any condition is breached.

The 'sub-letting workaround' some tenants attempt. A handful of tenants try to dress up a short-stay operation as a 'long-term sub-tenancy' to access the sub-tenancy reasonableness test — typically a series of overlapping 30-60 day 'sub-tenancies' to different individuals who never move in. This is a sham and VCAT treats it as such. The substance-over-form test asks whether the occupant is genuinely using the property as their residence — a rolling cast of weekend stays plainly is not.

Across our managed book we run a low-overhead short-stay-risk protocol on every property in suburbs and buildings where the base rate of unauthorised short-stay attempts is material.

Lease drafting. Every lease we draft for an owner client includes an explicit no-short-stay clause that goes beyond the REIV template — expressly prohibiting listing on Airbnb, Stayz, Booking.com, Vrbo or any equivalent platform; prohibiting any payment for short-stay occupancy; and characterising breach as serious-breach grounding immediate Notice to Vacate. This closes off the argument that the lease only contemplated traditional sub-letting.

Routine inspection protocol. Our inspectors are trained on the marker checklist above and run it on every routine inspection. Two minutes per inspection. The catch rate is roughly one unauthorised operation flagged per 30-40 inspections in high-base-rate suburbs. Markers are photographed (under the standard inspection notice) and reported to the landlord in writing within 24 hours, before any direct conversation with the tenant.

Quarterly online listing search. Every quarter we run a suburb-and-address search across Airbnb, Stayz, and Booking.com listings, cross-checking photos against properties we manage. Around 30 minutes per 100 properties, catching roughly one additional operation per quarter the inspection didn't surface.

On a confirmed short-stay breach. Straight to the breach-of-duty notice with the evidence stack. 70-80% resolve at this stage; 20-30% run to Notice to Vacate; a small minority require a VCAT hearing.

On a tenant who asks for permission. We brief the landlord on the financial framework (levy, insurance gap, OC position, bond gap), recommend default refusal in nearly all cases, and draft a refusal letter on lawful grounds. Where the landlord wants to consent on conditions, we draft the one-page conditional consent letter.

Fee tier. All of the above sits inside OptimaRea's standard property management at 4.90% + GST. Short-stay detection and enforcement is part of standard management, not a paid add-on.

If you suspect a tenant is running an unauthorised short-stay operation, or you've had a request for consent and want a written recommendation before responding, send us the property address, the current lease, and any evidence (neighbour complaints, OC reports, listing screenshots) and we'll have a written analysis back within one business day. Reach OptimaRea on (03) 9020 5658 or hello@optimarea.com.au. Melbourne metro and Geelong. Standard tier 4.90% + GST.