“App tax” coming 1 April 2024: GST on all Airbnb and digital platform services

“App tax” coming 1 April 2024: GST on all Airbnb and digital platform services

The new National coalition government has decided to keep the “app tax” initiated by the previous Labour government in 2023. During election campaigning National had promised to reverse the change that would have seen GST imposed on accommodation and transportation providers on platforms like Uber and Airbnb. However, now as they seek means to fund their coalition policy initiatives, they’re sticking with Labour’s plan, and the change will happen next April as originally scheduled. 

More about the original proposal

New legislation

The Taxation (Annual rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No 2) refers to a new category of services termed as “listed services”. This category encompasses services such as short-stay, and visitor accommodations (think Airbnb and Bookabach), and ride-share and food/beverage delivery services (such as Uber and Ola). 

Currently service providers enjoy exemption from collecting and remitting GST if their turnover remains below the $60,000 GST registration threshold. However, with the new legislation, this exemption is no longer applicable. 

Starting from 1 April 2024, under the revamped framework, the onus of GST collection and remittance shifts to the electronic marketplace itself, regardless of the GST registration status of the property owner or driver. In essence, the electronic marketplace is now deemed the service provider and is mandated to collect and remit 15% GST on all services rendered to end-users via their platform. 

How it works

There are nuances to transactions under this new regime.  

For GST-registered individuals or organisations: transactions between the electronic marketplace and a GST-registered property owner or driver are zero-rated for GST.  

For instance, if you rent out a property through Airbnb at $100 per night, Airbnb would charge guests $115, inclusive of GST, and remit $15 GST to Inland Revenue. The transaction between you and Airbnb is zero-rated for GST. 

For non-GST-registered individuals or organisations: the electronic marketplace deducts an 8.5% input tax from the taxable supply and passes this credit to the owner. This flat-rate credit aims to approximate the GST that could be claimed if they were GST registered.  

For example, if you rent out a property through Airbnb at $100 per night, Airbnb would charge guests $115, inclusive of GST. The owner would receive a credit of $8.50 (8.5% of $100) from the Airbnb and they would return net GST of $6.50 ($15 – $8.50) to Inland Revenue. 

Bigger businesses

It’s worth mentioning that larger commercial organisations can choose to opt out of the new regulations by making an agreement with the marketplace operator. By doing so, they can continue to handle their own GST responsibilities as usual. This will generally not be available to mum and dad Airbnb owners, as the threshold to opt out is $500,000 in sales. 

In summary

The way GST is collected and who is responsible for it is changing. If you provide services through these digital platforms, these changes could affect your tax obligations. 

If you are an Airbnb owner or other digital platform supplier and you’d like to know how these changes will affect you, please get in touch. 

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