Airbnb vs Long Term Rentals
Airbnb and similar platforms can be seen by some landlords as an alternative option to obtain income through their investment property rather than a more traditional residential tenancy .
Before considering this route of income generation , landlords must ensure they are aware of the tax implications that are possible , and that these may vary between regions .
If you are evaluating the pros and cons of shortterm accommodation vs long-term tenancies as the main income method for your investment property , these implications are something you should investigate .
Many councils across New Zealand are considering , or have already implemented , new rates specifically for property owners who utilise Airbnb . As an example , properties under the jurisdiction of the Auckland Council have seen significant rate increases if used for Airbnb purposes , and increases that can wipe out the gains derived through this short-term accommodation method of generating income .
Whilst it may seem straightforward to rent a property on Airbnb , it is an equally straight forward process for the IRD and local council to monitor your activity in this space .
GST Registration Requirements
Unlike long-term residential accommodation , short-term accommodation is a taxable supply for GST purposes , and landlords should be aware that once the property falls into the GST net there will be tax consequences .
A property will fall into the GST net if ;
• Short-term rental income from the property ( or multiple properties held in the same entity ) exceeds $ 60k . At this point the entity is obliged to register for GST
• The entity that holds the rental property carries on another taxable activity . If the combined income exceeds the $ 60k threshold they will be obliged to register for GST
• The entity is already registered for GST . In this case the short-term rental will become another taxable activity of the entity
• The short-term rental income is below $ 60k but the entity chooses to voluntarily register for GST .
• Please see next page for other important GST implications when utilising an online booking platform , such as Airbnb or Bookabach .
Once a property is in the GST net you can claim GST on the purchase price . However , specific rules prevent you from claiming this all at once .
If you sell the property or stop your short-term rental activity and deregister for GST you will be required to return 15 % GST to the IRD on the sale of the property unless it is sold to another GST-registered taxpayer , in which case it would be zero-rated .
This effectively creates a tax on any capital gain while the property was owned , and could end up costing an owner more in GST than would have been made in profits from short-term accommodation .
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