Short Term Rentals And Tax

With short term rentals increasing in New Zealand it is important to understand the Income Tax and GST implications that can arise from providing short term rentals such as AirBnB.  We offer personalised Short Term Rental Tax and accounting  solutions as well as business advice to ensure that you and your clients are meeting the taxation obligations arising from short term rental activity. 

SHORT TERM RENTALS, INCOME TAX, GST OR BOTH?

We have compiled an accounting 101 with some useful information below around the Income Tax and GST implication that can occur from short term rental activity.  Chat to us today for a personalised, cost effective , local solution for your individual needs. 

Income earned from providing short-term rentals is taxable in New Zealand. This means that you will be required to file Income Tax returns to account for the rental income earned. Generally, you will be allowed a deduction for the costs of providing the accommodation, such as interest on mortgages, rates, insurance and the like.

The calculation for deductible expenses will vary depending on the use of the property. If the property is used solely for short-term rentals purposes, then the costs directly related to the derivation of income will be deductible in full. If the property is used for both private purposes (your own accommodation) and business purposes (Airbnb) then the Mixed Use Asset (MUA) rules may apply to apportion the costs.

Income earned from providing short-term rentals is taxable in New Zealand. This means that you will be required to file Income Tax returns to account for the rental income earned. Generally, you will be allowed a deduction for the costs of providing the accommodation, such as interest on mortgages, rates, insurance and the like.

The calculation for deductible expenses will vary depending on the use of the property. If the property is used solely for short-term rentals purposes, then the costs directly related to the derivation of income will be deductible in full.

If the property is used for both private purposes (your own accommodation) and business purposes (Airbnb) then the Mixed Use Asset (MUA) rules may apply to apportion the costs.

While it is not immediately obvious, providing short-term rental can be a taxable supply for GST purposes. This is because the supply of accommodation in a commercial dwelling is not an exempt supply.
The definition of a commercial dwelling in the GST Act includes a hotel, motel, homestay, farmstay, bed and breakfast establishment, inn, hostel, boardinghouse, managed apartment or anything similar to the above.
A short term rental such as AirBnB will usually encompass one or more attributes similar to dwellings listed above. For instance, the short-stay aspect, managed by a third party and the charging of other supplies, such as a cleaning fee all indicate that the dwelling would be commercial in nature.
We note that GST registration would only be required if you breach the threshold of $60,000 in rental income. This threshold is determined based on gross rental.

If the rental income received is less than $60,000, you can voluntarily register for GST.  There are many situations where this may be a suitable option, such as when you expect to breach the threshold within the next year or two and you wish to make a GST claim on the full purchase price of the property, rather than making a change of use adjustment later which is less attractive.

TAKE THE FIRST STEP

Providing short-term accommodation can expose you to a variety of tax implications. The good news is that, as with any business, you can reduce the amount of tax that you are liable for by claiming any relevant expenses. The rules in this area are not straight-forward and as such, we would recommend that you speak to us about looking after your short-term rental accounting and tax obligations.