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 short-term 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 o 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.
GST REGISTRATION REQUIREMENTS
New rules have changed the GST treatment of shortstay accommodation when it is booked through an online platform, website, or app, that is operated by someone else e. g. you’ ve listed your holiday home on Airbnb or Bookabach, etc.
Short-stay accommodation booked through an online platform will attract GST at 15 %, regardless of whether or not you are GST registered. The platform operator( Airbnb etc) will be responsible for charging the GST, paying it to Inland Revenue, and then issuing a tax invoice back to the customer making the booking.
IF YOU ARE GST REGISTERED
• You must let the platforms you use know that you are GST registered.
• You will no longer need to account for GST at 15 % when supplying accommodation that is booked through a platform.
• You must instead report these in your GST return as zero-rated supplies.
• You don’ t need to issue tax invoices to either the customer or the platform.
• You should still be entitled to claim GST on your costs in your GST return, as you have done previously.
12 TENANT INFORMATION GUIDE