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Short-stay letting a granny flat or tiny home

From Modular Living Australia — the independent knowledge base Last updated: 8 Oct 2026

Victoria charges a short stay levy of 7.5% of the total booking fee on stays of under 28 days from 1 January 2025; it applies to a granny flat or tiny home occupied separately, but not to a principal place of residence.^[1][2] New South Wales requires short-term rental dwellings to be registered and caps non-hosted letting at 180 days a year in Greater Sydney and 60 days in most of the Byron Shire.^[3][4]

A second dwelling in the backyard is an obvious short-stay proposition, and a great many are let that way. Two states have published rules that apply specifically to it — and they work on completely different mechanisms. Victoria taxes the booking. New South Wales counts the nights and requires you on a register.

Neither rule is about how the dwelling was built. A modular granny flat, a tiny home on a slab and a converted garage are treated alike. What matters is whether the dwelling can be occupied separately, and whether anyone lives in it as their home.

Victoria: a levy on the booking §

Since 1 January 2025 the short stay levy applies at 7.5% of the total booking fee for each short stay in a Victorian property. A short stay is a stay of less than 28 consecutive days in the same property, not counting the checkout day^[1]. The levy was introduced by the Short Stay Levy Act 2024, which received Royal Assent on 29 October 2024, and is calculated on the total booking fee including cleaning fees and GST where applicable, but excluding credit card fees^[2].

The State Revenue Office addresses secondary dwellings directly, and this is the part that matters most to readers of this site. The levy applies to accommodation including a granny flat or other separate residence — such as a tiny home or caravan — even if it is on the same land as the main residence, provided it can be occupied separately^[1].

That is unusually clear drafting, and it closes the assumption people most often make: that because the second dwelling is in your own backyard, it rides on your home's status.

It does not. The exclusion is for a short stay in a property that is someone's principal place of residence, whether they own or rent it^[2]. Your house being your principal place of residence says nothing about the granny flat behind it. If nobody lives in the granny flat as their home, letting it for a weekend attracts the levy.

The practical consequence for someone weighing a second dwelling as an income asset in Victoria: 7.5% comes off the top of short-stay revenue, and does not apply to a long-term tenancy. That is a real number in a yield comparison, and it is deliberate policy — the revenue funds social and affordable housing^[1].

New South Wales: registration and a day count §

New South Wales regulates through the planning system rather than through tax. The short-term rental accommodation framework commenced on 1 November 2021 under State Environmental Planning Policy (Housing) 2021^[3].

Three obligations attach:

• Registration. All STRA dwellings must be registered on the government-run STRA Register^[3].
• Fire safety. A fire safety standard applies to dwellings used for STRA, with penalty notice offences for non-compliance^[3].
• Day limits, in some areas. Non-hosted STRA is restricted to a maximum of 180 days a year in the Greater Sydney region. The count runs within a registration annual period — 12 months from the initial registration date on the register — and bookings of 21 consecutive days or more are exempt from the day limits^[3].

The hosted and non-hosted distinction is where second dwellings sit awkwardly and where readers should be careful. The day cap attaches to non-hosted letting. Whether letting a backyard granny flat while you live in the front house counts as hosted is a question about the specific arrangement and the definitions in the Housing SEPP, and it is not resolved in the material compiled here. It is worth confirming before you rely on an uncapped assumption.

Caps are also not uniform across the state. In the Byron Shire local government area the non-hosted cap was reduced from 180 days to 60 days in any 365-day period across most of the LGA, with two mapped precincts in and around Byron Bay town centre and at Brunswick Heads operating without the cap. The 60-day provisions came into effect on 23 September 2024^[4].

Two very different regimes §

A national summary that gives one number for "Australia" is wrong. So is the widely repeated claim that a 180-day cap applies across the country — that is a New South Wales rule, and it does not apply to Victorian property.

Before you build for this purpose §

If short-stay income is part of the reason you are putting a second dwelling on the block, the levy or the cap belongs in the feasibility, not in the surprise column afterwards. Three questions worth settling first:

1. Does your council impose its own registration scheme or night cap? Both states leave room for local rules on top of the state framework.
2. If the property is strata or has an owners corporation, do its rules permit short stays at all?
3. Does your planning approval for the second dwelling place any condition on how it may be occupied?

What is not covered here §

• Queensland, Western Australia, South Australia, Tasmania, the ACT and the Northern Territory. No state or territory rules for those six were located in the sources compiled here. Council-level registration and rating arrangements exist in some areas, and none of it is inferred from Victoria or New South Wales.
• Council rules. Local registration schemes, night caps and rating categories apply in a number of areas in both states and are not listed here.
• Whether your arrangement is hosted or non-hosted in NSW. This determines whether a day cap applies to you and is not resolved in the material compiled here.
• Levy registration and lodgement mechanics. Who remits the Victorian levy differs between platform bookings and direct bookings. Confirm the current obligations and thresholds with the State Revenue Office.
• Income tax and CGT. Short-stay income has income tax consequences and can affect the main residence exemption. Those are covered separately on this site and with the ATO.
• Strata and owners corporation rules. These can restrict or ban short stays independently of state law and are not detailed here.
• Insurance. Standard home and landlord policies frequently exclude short-stay letting. Not addressed here.

References §