GST changes to short-term rental providers on platform providers like Air BnB

You may recall the discussion surrounding the Labour government’s proposed “AP Tax,” affecting platform providers like Airbnb. This tax would require these platforms to account not only for GST on their own fees but also on the supplies of accommodation they facilitate, whether the property owners are GST registered or not.

Initially, the National party vowed to repeal this proposed tax, but they have now decided to let the new rules proceed, citing the “fiscal hole” and a commitment to tax cuts.

Starting April 1, 2024, platform providers such as Airbnb must report GST to the Inland Revenue Department (IRD) for the accommodations they facilitate, regardless of the property owners’ GST registration status.

This change brings about some practical challenges.

For property owners who are GST registered, Airbnb will have already collected GST on the accommodations and accounted for it to the IRD. If these property owners were to pay GST again on the net proceeds received from Airbnb, GST would effectively be paid twice.

The solution being implemented is that GST registered property owners will need to report their Airbnb rent as zero-rated supplies to the IRD. When reporting zero-rated supplies on a GST return, these supplies are excluded from the overall supplies, ensuring GST isn’t paid on them.

Expenses related to this income can still have GST claimed in the usual way.

For non-GST registered owners, they will effectively be paying GST on their rental income through Airbnb without the ability to claim GST on their expenses. To address this, Airbnb will be allowed to claim an 8.5% “marketplace claim deduction,” compensating owners for their inability to recover GST on costs.

For GST registered individuals, your position remains neutral as long as you correctly report your Airbnb income as zero-rated supplies from April 1, 2024.

Non-GST registered owners will be slightly disadvantaged, as the 8.5% marketplace claim deduction is less than the 15% output tax liability on the rent. Additionally, they must ensure Airbnb knows their unregistered status and applies the 8.5% deduction accurately.

The new rules also include information reporting requirements, mandating that Airbnb disclose whom they’re selling accommodations for, and the income earned.

It’s crucial to note that if your short-term letting income exceeds $60,000, you must register for GST.

These changes introduce further complexity to tax compliance for short-term letting, and those involved are encouraged to seek advice on their individual circumstances.

Mark Withers
PKF Withers Tsang