New GST rules for short-term accommodation providers
If you currently have a rental property that you let short-term through platforms like bookabach, Airbnb or holidayhouses, you should pay attention to the new GST rules.
GST and short-term accommodation
There's no GST to pay on rental income from long-term residential renting. But short-term renting, on the other hand, is a taxable activity.
Generally, if the income earned from short-term accommodation is under $60,000 in any 12 months period, then you don't need to register for GST, and you don't need to file GST returns.
The new proposed changes do not change this requirement.
What's new
Up until now, if your income fell below the threshold of $60,000 and you're not registered for GST, the total rent earned on a platform like Airbnb would be passed on to you. However, under the new rules, this amount would be reduced.
The Government would now require the platform providers themselves to levy GST on all sales. IRD provided an example of what it would look
like. For example, if you rented out a property for $230 inc GST and you are not GST registered, then $30 of GST will be split into $17 to
be returned to you and $13 to be passed on to IRD.
Why the change
Inland Revenue said that short-term accommodation providers often fall below the GST threshold of $60,000. This gives them an unfair
advantage over traditional commercial GST-registered businesses. The proposed law change is designed to level the playing field.
When's the change effective from
The GST change is expected to take effect from April 2024 to give the companies time to build the required changes into their systems.
Cashflow Issue
From April 2024, if you are a non GST registered short term accommodation provider, you are likely to have your income reduce by around 6%!
GST risk for short-term accommodation providers
Another thing to note for certain short-term accommodation providers is that we recommend staying below the $60,000 threshold to avoid the need to register for GST. This is due to the potential for incurring a significant bill when selling or deregistering the asset for GST.
We can help
There are many nuances and pitfalls to be aware of around GST applicability and income tax calculations, so it pays to check with your accountant on how to manage these. We are specialists in accounting for rental properties. If you would like help in this area get in touch with us.