Introduction:
The landscape of taxation in New Zealand is undergoing a significant shift, particularly for those involved in the online platform economy. As of April 1, 2024, online marketplace operators such as Airbnb, Booking.com, are required to collect Goods and Services Tax (GST) on all services facilitated through their platforms.
As a accommodation host, understanding the implications of these changes is crucial. In this blog post, we break down what’s changing, how it affects you, and what steps you need to take to comply with the new regulations.
Listed Services:
The GST regulations apply specifically to “listed services,” which include short-stay and visitor accommodation. Additionally, closely connected services, such as cleaning fees for holiday rentals, will also be subject to GST when facilitated through online marketplaces such as Airbnb, booking.com
Impact on Service Providers:
The impact on accommodation hosts depends on their GST registration status.
If you are GST-registered, you will need to treat the supply of services as a zero-rated supply on your GST return, while still being able to claim GST on relevant expenses.
Large GST-registered sellers may have the option to opt out under specific criteria.
For non-GST-registered sellers, a flat-rate credit scheme will apply. Online marketplaces will collect 15% GST, returning 6.5% to Inland Revenue and passing the remaining 8.5% to the service provider i.e. the host or driver. This flat-rate credit acknowledges the costs incurred by service providers when supplying their services.
Examples:
GST Registered Accommodation Provider
Amy is GST registered and she rents her 3-bedroom property in Queenstown NZ out on the Airbnb platform. She chargers her guest a nightly rate of $400 per night and chargers $100 cleaning fee per stay including GST. Guest book her property for a total of 5 nights paying a total of $2,100.00 including GST for their stay.
Airbnb will include $2,100 of income on their GST return
Amy will include $1,826.08 ($2,100 less 15% GST) as income at Zero rated GST supply (as Airbnb has already claimed the GST) in her GST return.
Amy will be able to claim back GST on her expenses incurred in renting out her property as short term accommodation.
NONE GST Registered Accommodation Provider
Sam rents out her studio in Queenstown NZ out on the Airbnb platform. Sam is not GST registered as she earns under the $60,000 GST threshold. Sam chargers $150 per night plus a $50 cleaning fee per stay. Guest book Sam’s place for 2 nights paying a total of $300 including GST.
Airbnb will collect 15% GST on the booking ($39.10).
Airbnb will pass 6.5% of the GST collected on to IRD ($16.94) and they will credit back 8.5% of the GST collected to Sam ($22.15).
Key Points to Consider:
- Inform Your Online Marketplace if you are GST registered or not
- You will not be required to provide an invoice to your online marketplace for services listed on through their marketplace.
- Online Marketplaces will be required to provide the customer with taxable supply information.
- Non-GST-registered individuals must register if they earn more than $60,000 from taxable activities within a 12-month period. This includes sales provided directly to customers (for example through your own website) or made through an online marketplace.
- You can also register voluntarily if you earn less than this
- The flat rate credit scheme can not apply to you if you are GST registered
- If you receive a flat-rate credit when you are GST registered, you will need to return it to IRD by making a debit adjustment in your GST return.
Income Tax Return:
Your income tax return must include all of the income you earn and all your business expenses.
Do not include any flat-rate credits you receive as income in your income tax return. These are excluded income for income tax purposes.
If you are GST-registered, account for income and expenses on a GST-exclusive basis.
If you are not GST-registered, account for income on a GST- exclusive basis.
If you have expenses that relate to income made:
- through an online marketplace, deduct expenses on a GST- exclusive basis – this is because the flat-rate credits you receive from the marketplace recognises the GST on the costs you incur when making this income.
- outside of an online marketplace, deduct expenses on a GST- inclusive basis.
- partly through an online marketplace and partly from non- marketplace based sales, you will only be able to use a GST- inclusive basis for expenses relating to the non-marketplace based sales.
Who can opt out?
large non-individual GST-registered sellers may opt out if they meet the following criteria. Sellers who opt-out remain responsible for the GST obligations including providing taxable supply information to customers.
The criteria include:
- Sellers who make more than NZ$500,000 of supplies in a 12-month period – can notify you that they are opting out.
- Accommodation hosts who list (or can reasonably expect to list) more than 2,000 nights of accommodation in a 12-month period – can enter into an agreement with you to opt out.
NOTE: The 2,000-night threshold can be applied on a group basis. But it is not possible to aggregate accommodation nights across multiple online marketplaces.
For an opt-out agreement to be valid, there must be a written agreement that the seller will remain responsible for the tax obligations under the GST Act for the supply of listed services. This includes providing the customer with taxable supply information (if required) identifying them as the supplier, and providing GST returns and paying GST to Inland Revenue.
Sellers who meet the criteria can opt-out now before the rules apply from 1 April 2024.
Keep all information relating to opt-outs in your records.
