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Paying GST on Airbnb or Short-Term Rental Income

Danny Pritchard
When you rent out a property for short-term trips, you’ll deal with everything from broken mugs to questionable stains on the sofa. We’re here to throw GST into the mix. You may have to pay GST on the income you receive for providing accommodation, even through websites like Airbnb, Riparide and Bookabach. Yep! Even if your temporary lodgers throw a raging party or bring their very hairy dog. Depending on your income from the property, GST payments are mandatory even for one-off or irregular income. Oh yeah, and income tax will also be payable on any profit... But that’s a chat for another day.

First up: Let’s talk about the IRD’s definition of short-term rentals

A short-term rental, according to our friends at the IRD, involves renting out a residential property to guests for up to 4 weeks at a time. AKA short-stay accommodation. 

The property would not be your guest's “main home”, maybe they’re just there for a city break or a beach break (lucky them), or maybe it's a wife or a husband break (admittedly a smaller market that we haven’t seen Airbnb capitalise on yet).

Short-term accommodation doesn’t include accommodation for:

  • Residential tenants
  • Boarders
  • Care home residents
  • Students
  • Emergency tenants

So what does it include? Get to the point, BOM.

  • A room in your house/apartment
  • Your whole house/apartment
  • Another residential property. In other words, not your main home, but maybe an investment property or a property you’re planning on selling
  • A cottage, caravan or sleep-out on your property
  • A holiday home

Do I need to pay GST on Airbnb income?

We’d love nothing more than to give a simple yes or no answer, finish up this guide and head off to our yoga class, but like all things in the tax world, it’s not that simple. Let’s give it a crack anyway.

Right now, if you’re registered for GST then you do need to pay GST on Airbnb income. If you’re not registered for GST, then you don’t need to pay. However, changes are coming in 2024. Stick with us and we’ll cover what you can expect.

Should I register my Airbnb for GST?

If your income was at least $60,000 in the last 12 months or you expect it to be at least $60,000 in the next 12 months, you must register for GST. This covers either Airbnb income on its own or in conjunction with other taxable income you earn. It makes no difference if the property is owned by a trust, company or is in your personal name. If the property is owned in your personal name, your salary (PAYE income) is not counted towards the $60,000 threshold.

What if your income is less than $60,000 but you still want to register for GST? Well, you can do that too. This might be a good option if you expect to breach the threshold within the next year or two. 

You might be keen to register for GST especially if you’re able to claim it on the purchase price (as long as the seller is registered) or if you’ve splashed some cash renovating the property. Before you do get all GST-happy, remember that this would mean the subsequent on-sale price of the property will be subject to GST.

In other words, it could be much higher than the amount you claimed if the property picks up in value over the years.

Some times when you must return GST output tax

Unfortunately, you can’t just hide from your GST responsibilities and hope they go away.

If you do any of the following, you’ll be legally obliged to return GST output tax:

  • Sell your residential rental property
  • Change its use from GST-taxable to non-taxable (where you may become exempt from paying GST)

A scenario where “change of use” might come into play is when you switch from short-term renting (which is GST-taxable) to long-term renting (which isn’t GST-taxable).

If you were paying attention earlier, you’d already know that the rules are set to change in 2024 - and this might change your opinion on the whole thing. 

Don’t freak out. Talk to BOM or your accountant for advice.

New GST rules for short-term rentals in NZ

As if keeping up with tax rules wasn’t difficult enough, we’re regularly thrown curveballs that mean we have to re-learn some of the stuff we already learned. And there’s us thinking we graduated accounting school years ago…

Right now, if your income falls below the threshold of $60,000 and you’re not registered for GST, the total rent you earn via short-term rentals (Airbnb, Bookabach etc.) goes straight into your pocket. For example, say you rent your property for $460, you’d get the entire $460.

But this is all set to change. 2024’s new rules will reduce that amount. So what will you be entitled to then?

Under new Government rules, the platform providers themselves will have to levy GST on all sales. In our example where you rent out a property for $460 including GST and you’re not GST-registered, $60 of GST is split between you and the platform. $34 gets returned to you and the remaining $26 is passed to the IRD.

“Why the change?!” We hear you cry. Since most short-term accommodation providers currently fall below the $60,000 threshold, Inland Revenue noticed they were getting an unfair advantage over traditional commercial GST-registered businesses. 

The new rule will come into effect in April 2024, so you’ve got time to get your head around it. Or just give BOM a nudge for some further clarification. 

How will the IRD keep track of this thing?

Good question. The booking sites that make short-term accommodation possible (Airbnb, Bookabach, Holiday Houses - you know the ones) will have to readily provide information online about who provides short-term accommodation through their site.

This makes Inland Revenue’s job easy. They can simply head online and check the list to see who is including income from these services in their tax returns. And who isn’t.

Clear up the confusion with BOM

You take care of the decor and the local pub recommendations; let us take care of the GST obligations and tax calculations.

Worry no more about the nuances and pitfalls that come with renting out short-term accommodation in New Zealand. Start with a chinwag to learn how simple it can really be with the savvy, smart, and hilarious* accountants at BOM.

*don’t sue us if we don’t make you laugh

Book your obligation-free call today.

Danny Pritchard

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