Marketplace rules for short stay accommodation (Air BnB and similar platforms).

New rules from 1 April 2024 for taxpayers listing on Air BnB, Bachcare (and similar)

Many New Zealanders rent out a holiday home for short-stay holiday lets on platforms such as Air BnB or Bachcare. From 1 April 2024, new marketplace rules for short stay accommodation fundamentally change the GST treatment when booked through an online platform. For instance, a website or an app that is operated by someone else. However, there is no change to the rules where you are selling short-stay accommodation directly e.g. through your own website. The new rules also apply to certain ride sharing / hailing, and food and beverage delivery services, but this note concentrates on short-stay accommodation providers.

Marketplace rules for short stay accommodation – who is responsible?

1. Short-stay accommodation booked through an online platform will attract GST at 15%, regardless of whether or not you are GST registered.
2. The operator of the platform will be the one who is responsible for charging the GST, paying it to Inland Revenue, and issuing taxable supply information (tax invoices) to customers.

GST registered and a short stay accommodation supplier?

Here is the process and what you need to do:

Action point: Let the platforms you use know that you are GST registered and provide your GST number.

• You will no longer need to account for GST at 15% on your supplies of accommodation booked through a platform.
• You must report these in your GST return as zero-rated supplies instead. Action point:
  • Set up an income account in your accounting system: Income – Accommodation Platform. Select ‘Zero rated’ as the GST tax type*. This ensures it will report in your GST return correctly.
  • If you have income direct from other individuals, this will need to go to a separate account in your accounting system and returned for GST like previously. Set up an income account in your accounting system: Income – Accommodation. Select ‘GST on Income’ as the GST tax type*.
• Thankfully, issuing taxable supply information / tax invoices to either the customer or the platform is not required – less admin!
• Further, you should still be entitled to claim GST on your costs in your GST return, as you have done previously. You will not receive any flat rate credit from the platform (the flat rate credit is discussed below).

*This is the recommended account set-up for Xero users.

Not GST registered and a short stay accommodation supplier? 

Here is the process and what you need to do:

If you are not currently required to be registered, this change does not mean you need to register or account for GST. The platform will start accounting for GST. It also does not mean that your property will come into the “GST net” and therefore have GST implications if sold.

Action point: Monitor whether your supplies will reach the GST registration threshold of $60,000 in any 12-month period.  If they will, you will need to register for GST and must notify the platform of your change in GST registration status.

Flat rate credit scheme for non-GST registered parties.

If you are not registered for GST, the platform should pass you an amount equal to 8.5% of the GST exclusive price of your supply to the guest.

Underlying suppliers who are not required to register (supplies under $60k per annum), could alternatively register for GST voluntarily. In this situation, you claim GST on costs, instead of receiving the flat rate credit. Here, it is important to consider the consequences of GST registration on the property. i.e. it may become subject to GST on sale or if you change it back to private use. We recommend seeking advice.

Incorrectly receiving the flat rate credit scheme if you are GST registered.

If GST registered and the flat rate credit is accidentally received, you are required to pay this back to Inland Revenue in your GST return. If not, interest and penalties on the amount received may accumulate.

Impact for income tax – more compliance (and likely cost) coming.

GST registered

Provided you are GST-registered, there is no change to what you need to do. You continue account for income and expenses on a GST-exclusive basis.

Non-GST registered.

When you are not GST-registered, there will be some complicated calculations when preparing your financial accounts and income tax return. This will likely lead to more compliance costs.

For income, your income will be accounted for on a GST exclusive basis. The flat-rate credit is excluded income (i.e. non-taxable) for income tax purposes. If you have:

• Expenses for bookings through a platform, deduct expenses on a GST exclusive basis.
• Expenses for bookings outside of a platform, deduct expenses on a GST inclusive basis.
• Expenses relating partly to bookings through a platform and partly from non-platform bookings, an apportionment may be required. See the special report published by Inland Revenue for more details on the income tax calculations required.

Summary

Business Like NZ assume that as the extra GST from the new marketplace rules for short stay accommodation will be passed on to consumers in same way or another. Because of this, the cost to the consumer through such digital platforms will increase. There is also some extra time we anticipate when preparing non-GST registered taxpayers financial and tax returns.

If you would like some advice specific to your situation, please contact us at Business Like NZ Ltd