Dealing with GST compliance can be tricky for short-term accommodation providers, especially with recent legislative changes. As of 1 April 2024, the “app tax” mandates that GST be collected on all services offered through electronic marketplaces, such as Airbnb, regardless of the service providers’ registration status.
This significant change has raised numerous questions, both specific to the “app tax” and general enquiries about the GST registration threshold. In this blog, we address some of these concerns, providing clarity on how these new rules affect Airbnb hosts and other short-term accommodation providers.
$60K threshold
Let’s start by addressing questions regarding the $60K GST registration threshold.
Should I register for GST if my short-term rental income is below $60,000?
Generally, Airbnb hosts would want to avoid earning over the $60,000 threshold and having to register for GST. The key reason is that if the property has appreciated in value, the eventual sale of the property will be subject to GST, potentially resulting in a significantly higher tax liability.
More about tax implications of short term accommodation rental income
We recommend consulting with an accountant when deciding whether to register for GST.
Do I have to register for GST if I own a property and rent it out via Airbnb?
No, even under the new marketplace rules you do not have to register for GST if your gross turnover from short-term rentals via Airbnb is below $60,000 per annum. The obligation to register for GST depends on whether your total income from taxable supplies exceeds $60,000 annually.
Note that this threshold applies cumulatively across all properties. For example, if you have two properties each generating $35,000, you must register for GST because the combined total exceeds the $60,000 threshold.
I am registered for GST as a sole trader and my home that I Airbnb is also only owned under my name. Will my sole trader income and Airbnb income be combined when determining the $60K threshold?
Yes, when determining the $60,000 GST registration threshold, your sole trader income and Airbnb income will be combined. The threshold applies to the total turnover of your business activities under your name, which includes all income from both your sole trader operations and any income earned from your Airbnb property. If the combined total reaches or exceeds $60,000 in a 12-month period, you would need to be registered for GST.
However, if you operate a business as a registered company, and your Airbnb is operated personally, the income from from the company and the Airbnb are considered separate for GST purposes. You would assess the $60,000 GST registration threshold based on the income of each entity independently.
More about owning an Airbnb rental personally vs through an entity
‘App tax’ specific questions
These questions are related to changes that have come in since the introduction of the marketplace rules on 1 April 2024. Under this change, electronic marketplaces are deemed the service providers and must collect and remit 15% GST on all services offered to end-users through their platforms.
More about “app tax” effective from 1 April 2024
Will I be at a disadvantage if I am not registered for GST?
No, you won’t necessarily be at a disadvantage if you’re not registered for GST. The platform provider will pay you a portion of the GST collected (8.5%), and if market prices increase due to GST application, you will benefit from part of that increase. For example, if you rent out your property for $100 a night on Airbnb, Airbnb charges guests $115, including $15 GST, which is paid to the IRD. As a non-GST-registered property owner, you receive $8.50 as a “flat-rate credit,” calculated as 8.5% of the $100 value of the supply. Thus, you effectively receive $108.50 of the $115.
And, as noted above, there are disadvantages to registering for GST for Airbnb income when you go on to sell your house.
Should I decrease my nightly rate to remain competitive?
With all accommodation providers– including small Airbnbs and large hotels – now charging 15% GST to guests, you will need to decide whether to pass on or absorb, some or part of, the GST increase in order to remain competitive with operators who were already charging GST.
Pricing is always subject to the market – you can only charge as much as the market will support. Market price will be related to supply conditions i.e. if everyone’s cost of doing business increases by 6.5%, normal economic theory would suggest that less people would list their properties and that the price would be higher. As there are other accommodation suppliers that are competitors who are not impacted by the change (hotels, motels, larger Airbnb operations that are already GST registered) any movement in the price due to this change would likely be less than 6.5%. But this is only analysing the supply side, changes in market price will occur also because of changes in demand conditions, for example because of a recession, or conversely greater numbers of international tourists. So from a practical point of view the way to price remains the same – look around and see what others are charging.
If your strategy was to retain your previous revenue of $100/night, using the previous example, you could:
- decrease your price to approx. $92.20/night excluding GST
- Airbnb would charge the guest $106.03/night including GST
- $7.84 (8.5%) would be credited back to you
- Your net revenue is $92.20 + $7.84 = $100.04
- The guest pays $6.03 (6%) more than they would have previously
Tip: on some platforms, such as Airbnb, the nightly rate entered by the host excludes GST, whereas on other platforms, like Booking.com, the host enters a GST-inclusive rate.
Do I pay tax on the 8.5% flat-rate credit?
No, the 8.5% flat-rate credit is not considered taxable income. However, you cannot claim a full deduction for the GST-inclusive costs related to short-term stay activities.
For example, if you spend $1,500 on maintenance for your short-term rental property. Under the old rules, if you were a non-GST registered owner, you would have claimed a deduction for the full GST-inclusive cost of $1,500. With the new flat-rate credit scheme, your deduction is based on the GST-exclusive amount. With GST at 15%, the calculation is $1,500 / 1.15 = $1,304.35. Therefore, you would claim $1,304.35 for income tax purposes, rather than the full $1,500.
Does GST apply to bookings made on Airbnb before 1 April for a stay after 1 April?
If you’re not GST registered and had bookings made before 1 April, those bookings will not be subject to 15% GST.
What happens if I collect payment myself? eg, direct bookings from a website, or using platforms where direct payments are made.
For direct-to-customer bookings, you will responsible for remitting the GST of 15% less 8.5% credit (6.5%) to the IRD yourself. Please get in touch with us for more information.
If your accommodation is listed on a platform where you collect payments directly from the guest, the platform provider should send you a monthly invoice for 6.5% GST which they pay on your behalf to IRD.
My Airbnb is already registered for GST and I am already collecting and remitting GST, can I keep doing this?
Some GST-registered accommodation hosts can choose to opt out of the new marketplace rules and carry on being responsible for their GST obligations. To opt out you must:
- make more than $500,000 of supplies in a 12-month period and be a non-individual
- meet a 2,000-night threshold, based on the number of nights of accommodation listed through a single online marketplace.
More about opting out of the marketplace rules (ird.govt.nz)
I have two properties listed on the same Airbnb account. One is attached to my house and is not GST registered, one is a commercial entity and operates as a GST registered company. How will Airbnb handle the GST collection and flat-rate credits?
From what we understand, Airbnb treats all properties listed under the same account uniformly for GST purposes. If you want to maintain the same GST obligations for your commercial operation as before 1 April, you would need to operate under a separate Airbnb account and meet the opt-out requirements above.
More information
Do you have a tax question related to Airbnb or short-term rentals? Please get in touch with us for advice. And keep following our blog for more updates and detailed guidance on managing your Airbnb rental.
