Know your GST Obligations

AirBnB

As AirBnB continues to disrupt the hotel industry, we thought it might be timely to review the GST implications of this additional income stream. In this article we will focus on the GST aspects, but income tax implications and the Mixed-Use Asset rules can be found in our blogs. (AirBnB Host Tax Implications & Mixed-Use Asset Rules)

When AirBnb first hit the scene, it sounded like the perfect way to save some money for that overseas holiday, but as AirBnB gains popularity, it is timely to review the tax implications so that the little extra income doesn’t turn an unexpected tax bill.

While it is not immediately obvious, providing short-term accommodation can be a taxable supply for GST purposes.

The supply of short term accommodation is a taxable supply for New Zealand Tax purposes.

When do you need to register for GST?

1.When your gross rental (before deduction of costs) exceeds $60k or when you expect to exceed the $60k threshold within the next 12 months.

While this seems a lot, this amount can easily be exceeded in tourist hotspots.

2. If gross rental income is under $60k, you may want to opt for voluntary registration in certain situations. Such as when you wish to make a GST claim on the full purchase price of the property, rather than making a change of use adjustment later which is less attractive.

Second Hand Goods Claim

A taxpayer can recoup (over time) the GST costs paid when the property was acquired. There is a specific mechanism for calculating the amount of GST that can be recouped with each return, the amount of GST that can be claimed is proportional to the percentage of business use during the adjustment period.

GST is payable on the sale of the property or upon de-registration (treated as a deemed sale), except where the sale is made between 2 GST registered parties and the property continues to be used as a taxable supply. This is a trap for the unwary! This is effectively a tax on your capital gains and it can happen even though the property remains in your ownership.

Ownership structure and GST

Where properties are held in family trusts, companies or other investment entities and are used for both short term accommodation and private use, there may be requirements to charge a deem market rental for the private use, with GST on the deemed rental being paid to the GST

We would encourage you to contact us on 0508 ACHIEVE with any questions you have or to discuss your specific situation in more detail to ensure you are meeting your obligations

 

Check out our post on AirBnB Tax implications and the Mixed-Use Asset rules on https://achievebiz.co.nz/airbnb-host-know-your-tax-gst-obligations/