New GST rules for Airbnb and Short Term accommodation
There seems to be so many tax changes recently. Another new one is due to come out from 1st April 2024.
New GST rules for Airbnb and Short Term accommodation – 1/4/24 application date.
First - these aren't as bad as they could be.
Generally for Airbnb properties our main concern is to stay below the GST threshold and not be GST registered (more on the risk below). These new rules, DO NOT CHANGE THE REQUIREMENT TO GST REGISTER.
So if your income does not reach or go above the $60,000 threshold for the entity, from taxable supplies, in any 12 months period, then the entity will still not need to GST register.
Cashflow issue - The new changes will affect your cashflow.
Currently if you are not GST registered and rent your property on Airbnb for $230 incl GST, you would receive all the $230 income.
Under the new rules, this will would reduced to $217.
So the Marketplace operator (Airbnb for example) would receive the $230, of which $30 is GST. For a non GST supplier, Airbnb would use the flat-rate of 8.5%, and this $17 would go to the supplier, so they would get the GST exclusive amount of $200 plus the $17 = $217.
The $30 GST less the $17 flat rate = $13, would go to IRD.
OVERALL - from 1/4/24 if you are a non GST registered Airbnb or short term accommodation provided, you are likely to have your income reduce by around 6%!
So another cost to consider if you are thinking about Airbnb or short term accommodation.
Free webinars and recordings
You can access all of these on this link, https://linktr.ee/RossBarnett
Recording of webinars;
- Rental property basics
- Adding value and cashflow
There are also 3 great videos near the bottom of the link.
Know your numbers
With all the tax changes, it is important to know what your property is making you, or losing you. And what tax you have coming up.
For new clients having a property advisory meeting with Ross is a great opportunity to look at your cashflow, ways to minimise your tax or improve your equity long term. With higher interest rates and loss of interest deductions, your numbers could be very different over the next few years.
GST Risk for Airbnb and short term accommodation
Why are we so concerned about going over the GST threshold? Here is an example of a problem I discussed with a client last night.
Owned the property for over 25 years, so cost say $230,000. Has been personal home for all that time. Now worth over $2 million, and say $2.3 million to make my numbers easy.
They are now looking to rent the property out on Airbnb as in good location, near Auckland beaches.
If have to GST register as the entity is GST registered, or the income in 12 month period is $60,000 or more from taxable supplies (so if another business or more Airbnb properties this could be a major problem), then property falls in the GST net.
GREAT – we get to claim the GST. But it is based on the original cost, so can only claim GST of $30,000
TERRIBLE PART, AND BIG RISK – Once the property is in the GST net, if sold or deregister for GST then have to repay GST at market value. So $300,000 GST to pay!!
JUST LOST $270,000 IN GST!!!
If you have a possible problem with GST and Airbnb/ short term accommodation, get onto it early. Once you have earned $60,000 there isn’t much we can do and it is too late.
Disclaimer: This article has been prepared for the purpose of providing general information, without taking into consideration any particular person's objectives, financial situation or needs. Any opinions contained in it are held by the author as at the report date and are subject to change without notice.
Any changes in law or the facts through a misrepresentation or error or consequential developments may lead to a modification or change to all or part of this opinion. We do not accept a general responsibility to update this opinion for such changes. The opinion expressed herein is not binding on the Inland Revenue Department and we cannot guarantee that they will adopt the same opinion as us. We recommend you receive specific,expert advice before making any structural changes.
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