Tax Management for Your Airbnb Property in New Zealand with 2024 GST Changes
Prosaic Team
The landscape of Airbnb hosting in New Zealand is about to undergo significant changes with the introduction of new Goods and Services Tax (GST) legislation effective from April 1, 2024. Here are the basics for managing tax obligations for your AirBnB property, and some specific guidelines on the new changes.
Understanding the GST Threshold:
Currently, if your Airbnb earnings exceed $60,000 in a 12-month period, you're required to register for GST. This means charging GST on your rental rates and claiming it back on related expenses. Staying informed about your income and keeping detailed records is vital to determine if and when you cross this threshold.
New Legislation on the Horizon:
With potential new laws making all Airbnb income eligible for GST, regardless of the $60,000 threshold, it's important to stay ahead of the curve.
Understanding the GST Changes:
From April 2024, all accommodation and transport services facilitated through electronic marketplaces will incur a 15% GST, irrespective of the property owner's or driver’s GST registration status. This legislative shift introduces 'listed services'—a category that includes commercial, short-stay, and visitor accommodations (such as Airbnb and Bookabach), alongside ride-share and food/beverage delivery services (like Uber and Ola).
Under the new rules, the marketplace itself is deemed the service provider, bearing the responsibility to collect and remit GST on all transactions. For GST-registered property owners, transactions with the marketplace are zero-rated, meaning they are treated as if they were GST exempt but allow the recovery of input tax. This mechanism ensures that GST-registered individuals who rent out a property on Airbnb, don't face a financial disparity. Airbnb will charge guests the rate plus GST, remitting the GST portion to Inland Revenue without affecting overall revenue
Impact on Non-registered Owners:
For those not registered for GST, the marketplace will deduct an 8.5% input tax from the taxable supply, passing this credit to the property owner. This flat-rate credit aims to simulate the GST claimable benefits, had they been registered. Essentially, non-registered individuals will observe an uptick in revenue due to this additional credit, provided there's no change in their sales or bookings volume.
Deductible Expenses:
Maximizing your deductible expenses can reduce your taxable income. Common deductions for Airbnb properties include utility costs, property maintenance, and a portion of your mortgage interest or rent if you’re leasing. Keep receipts and records of all expenses to ensure you claim everything you're entitled to.
Capital Gains and Depreciation:
If you sell your Airbnb property, you may be subject to capital gains tax, especially if it has been used to generate rental income. Additionally, you can claim depreciation on certain assets within the property, such as furniture and appliances, which can further reduce your taxable income.
Income Apportionment:
If your property is used both as a private residence and an Airbnb, you'll need to apportion your income and expenses accordingly. Only the portion that relates to the rental activity can be declared as income and claimed as expenses for tax purposes.
Professional Advice:
Tax laws can be complex, and with the landscape constantly evolving, getting professional tax advice is crucial. A specialist can help you navigate the specifics of Airbnb taxation, ensuring you remain compliant while optimizing your tax position.
Plan for Tax Payments:
To avoid surprises, estimate your tax liability and set aside funds regularly. This proactive approach ensures you’re prepared for tax payments, helping you avoid penalties for late payments.
Navigating the tax implications of managing an Airbnb property in New Zealand requires diligence, detailed record-keeping, and a proactive approach to financial management. By understanding your obligations and seeking expert advice, you can ensure your rental remains profitable and compliant.
