Airbnb rentals or ‘short-stay accommodation’ has become a familiar part of our landscape. Some hosts rely on income to fund their own holidays, while others have turned it into a full-time business.
Due to the varying scale of activities, you may have a host who only rents their house over Christmas and doesn’t report their income. At the other end of the scale, you may have a GST-registered host that is renting multiple apartments year-round.
To level the tax playing field between hosts and ensure that income is being reported, a bill was enacted on April 1st, 2023 requiring platforms like Airbnb to collect information from hosts, including their sales income and IRD numbers. This information will be collected from January 1st, 2024, and shared with Inland Revenue and foreign tax authorities by early 2025.
Another aspect of the bill involves Airbnb and similar platforms charging GST to guests on behalf of hosts, at a rate of 15%.
If a host is registered for GST, they won’t pay GST on GST-exclusive income received from Airbnb (as it is zero-rated), but they may claim GST-inclusive expenses. On the other hand, if a host is not registered, Airbnb will collect GST and provide the host with an 8.5% credit. These changes will apply to purchases made on Airbnb (and similar platforms) after March 31st, 2024.
Additionally, there’s a favourable update to the GST legislation in the bill for short-term rental properties classified as ‘predominantly private’. Previously, when a person was required to register for GST after more than $60,000 of short-term rental revenue in one year, GST would apply to the sale of their home. However, under the new bill homeowners may elect not to claim GST on their property after registering and not be required to return GST when they sell. Furthermore, some GST-registered homeowners who have previously claimed GST on the cost of their property may now pay that GST back before March 31st, 2025 to avoid paying GST on their home’s current market value.
If you need a hand navigating these changes, we’re here to help. Call Alex on 022 525 0115.
Alex Cull, Tax Partner
[email protected]