Airbnb at your home or the bach? Find out about GST
Nov 19, 2019
Income earned from rent is taxable and you can claim deductions for costs related to earning that income. Different tax rules apply depending on the circumstances.
For tax purposes, short-stay accommodation is different from accommodation provided to tenants, boarders or care home residents, or student or emergency accommodation.
This fact sheet looks at the GST implications of renting out short-stay accommodation from your home, sleepout or bach, typically through Airbnb or Bookabach. A short stay is anything up to four consecutive weeks.
Figures to focus on
2,500 |
If your tax due at end of year is more than $2,500, you’ll have to pay provisional tax instalments the next year. |
60,000 |
If you earn more than $60,000 a year from your taxable activities, you must register for GST. If you earn less than $60,000 a year, you can choose to register for GST. Think carefully if it’s right for you. |
What do I need to know?
If you are renting out short-stay accommodation to guests for payment on a continuous or regular basis, it’s a taxable activity and you may choose to register for GST. If you earn more than $60,000 a year from your taxable activities in any 12-month period, you must register for GST.
The $60,000 threshold
When calculating the $60,000 threshold be aware that:
- all taxable activities are included, not just the activity providing short-stay accommodation. You could be over the threshold if you have another business as well
- The threshold includes supplies to ‘associated persons’ that will be valued at market value. For instance, the family trust may own a holiday home which the trustees rent out but also allow the beneficiaries to use rent-free or for mates’ rates. These stays may be valued at market rates in calculating whether you exceed the registration threshold
Conducting a taxable activity
Factors which may indicate to Inland Revenue that you are conducting a taxable activity include:
- initial steps such as undertaking feasibility studies, preparing business plans, and approaching local authorities for the necessary consent, if required
- whether your property is listed on relevant websites at an appropriate price
- the size and layout of your home or premises, or modifications to your home or property to enable you to provide short-stay accommodation
- whether your home or property is in a desirable location
- the time you dedicate, and can dedicate, to providing short-stay accommodation and the period you make it available for
- continuing steps taken to make it available, such as advertising and ongoing marketing
- future bookings.
Note that even if you are not conducting a taxable activity for GST purposes, there may still be income tax implications.
Registering for GST
If you have the choice, think carefully about whether registering for GST would suit you. Once you register for GST, there are on-going requirements and when you sell your property or stop providing short-stay accommodation you will probably have GST to pay.
On-going requirements include:
- recordkeeping
- invoicing
- filing GST returns for each return period, 6-monthly or 2-monthly
- adjustments for private and income-earning use
Key concepts if you register for GST
Supplies |
In your taxable activity you make goods or services available to customers for money. These are referred to as supplies. |
Output tax |
If you are registered for GST, you charge GST on supplies and pay it to Inland Revenue. This GST is referred to as output tax. You need to account for GST output tax on all supplies (including to associated persons). |
Input tax |
When you pay for things you need to run your taxable activity, you are charged GST. This is referred to as input tax. You can claim input tax back from Inland Revenue. |
Apportionment |
If you provide accommodation from your own home or a property that you also use privately, you can’t claim the full amount of input tax back. You need to apportion it between private and income-earning use. You can claim the portion that relates to income. |
Change-in-use |
When you purchase or build a property you intend to use yourself and rent out for short-stay accommodation, you need to specify how much of the property will relate to income-earning against private use. You can claim input tax on the portion of GST that relates to income-earning. If actual use turns out to be different, you need to make annual adjustments for change in use. We can help you with these. |
Mixed-Use Assets |
A mixed-use asset has both income earning and private use but is unused for at least 62 days a year (eg, holiday homes and baches). They have special rules for calculating input tax. |
You may be able to claim a GST refund back on the purchase price for a portion of your property. Balance this against the subsequent GST tax liability when the property is sold or your taxable activity ends. GST is charged on the property’s value and property usually increases in value. So, your GST tax liability when you sell or stop your activity will generally be greater than any initial benefit you receive.
If you sell the property to a buyer who is also GST registered and intends to use it for Airbnb, or some other taxable activity, it’s possible that GST output tax will be at 0% on the sale of the property. However, it’s more common that sales of residential property used for short-stay accommodation are to non-registered persons and these sales attract standard GST.
Cancelling your GST registration
If you stop your taxable activity renting on Airbnb:
- you must notify Inland Revenue within 21 days and your registration for GST will be cancelled
- you must account for GST output tax on any goods and services that related to assets of your taxable activity immediately before you stopped being registered. The GST will be based on the open market value of your property
- if you have another business you may remain registered for GST, but you will need to make a change-in-use adjustment for your property
Your GST registration might cease where:
- the value of your taxable supplies falls below $60,000 and you ask to cancel your registration
- Inland Revenue investigate whether you’re carrying on a taxable activity, decide you’re not and cancel your GST registration. They may investigate if you continue to be registered but file only ‘nil’ returns and no longer make taxable supplies
Our recommendation
Talk to us if you’re thinking about becoming GST registered. It doesn’t suit everyone, and you need to be prepared for the compliance and tax obligations if you choose to go that way.