Important changes are on the horizon for online service providers and 'Marketplace' operators such as Airbnb and similar accommodation service providers, as well as ride-share and food delivery service providers. These changes relate to GST and will take effect from 1 April 2024.
If you engage in activities like renting out your private home or bach to earn extra income, these changes will impact you. Therefore, we urge you to take a moment to read this email/blog.
Online platforms offering short-term accommodation services, including Airbnb, Bookabach, Bachcare, as well as service providers like Uber and Uber Eats – referred to by IRD as 'Marketplace' operators – will be required to collect GST on all listed services starting from 1 April 2024. Consequently, GST will be applied to all online services, irrespective of whether the 'Host' (physical owner) is registered for GST or not. Additional charges by online service providers, such as cleaning fees and delivery charges, will also include GST.
Let's delve into the implications for those of you generating income through Airbnb or similar platforms.
Here are some key definitions:
Host: Physical Owner of the property
Marketplace operator: Electronic platform facilitating booking and payment services – for example, Airbnb, Bachcare, etc.
This category may also encompass private property managers who:
Act as an intermediary between Airbnb and the Host, utilising Airbnb to manage bookings on behalf of the Host.
Operate their own website for managing bookings and processing payments through an electronic platform.
This does not include an owners/hosts personal website, or apps that simply connect customers with owners/hosts without payment portals.
Time of supply: The earlier of payment or invoice
Start Date for these changes: 1 April 2024
If you have bookings confirmed before 1 April 2024, the Marketplace operator can choose either to adhere to the new rules and account for GST or continue with the existing rules. The Marketplace operator must communicate their decision to the Host.
Action to take before 1 April:
There are some things you will need to do as a Host before 1 April 2024.
You need to notify the Marketplace operator/s you use, that you are or are not registered for GST.
You will need to provide your Marketplace operator/s with your IRD number, name and address.
GST impacts and key info for Hosts:
Unregistered Owners/Hosts:
Properties will be exempt from GST if:
The home is owned by an individual owner(s)
The primary purpose of the property is non-taxable, e.g., serving as the Host's primary residence or primarily used for personal purposes.
A holiday home could be excluded if used for non-taxable purposes for more than 50% of the time.
No GST claimed on the property at time of purchase.
No GST was claimed on the property during the purchase. If GST was claimed, there is a transitional period until June 2025 to repay it and exclude the property from the GST scope.
The $60,000 turnover threshold for GST registration still applies.
The Host must not be GST registered individually for other purposes.
By 1 April 2024, Hosts must notify the Marketplace operator about their non-GST registration status.
IRD will liaise with the Marketplace operators confidentially in relation to GST.
The Marketplace operators deduct 15% GST from sales. They return 6.5% of this to IRD, and there will be a flat rate credit of 8.5% payable to the Host. This 8.5% credit is considered excluded income for tax purposes and may be disbursed through reduced commissions by the Marketplace operator.
Marketplace operators will pay Hosts based on net sales, with related expenses claimed excluding GST. GST expenses are categorised as non-deductible.
If a Host has mixed Marketplace and non-Marketplace expenses, an apportionment must be applied.
For Registered Owners/Hosts:
Property captured in the GST net unless:
The home is owned by an individual owner(s).
The principal purpose of the home is non-taxable e.g. is a Hosts main home, or used primarily for personal use.
A holiday home could be if used for non-taxable purposes for over 50% of the time.
No GST claimed on the property at time of purchase or was repaid within the transitional period.
Marketplace operators will deduct 15% GST from sales, and returns the entire amount to IRD. Net sales, excluding GST, will be paid to Hosts as zero-rated income.
Hosts can claim GST on expenses in the standard manner, leading to GST refunds due to the income zero-rating and the ability to claim GST on expenses.
If a Host receives the 8.5% flat-rate credit, it must be returned to IRD via the GST return to avoid penalties for false declarations.
Examples:
GST returns:
As a GST-registered Airbnb Host, if you rent out a property for $100 per night, and Airbnb adds 15% GST, making it $115 for the guest. In your GST return, you’ll include $100 as sales, showing it as a GST zero-rated supply, resulting in $0 GST collected. You can then claim back GST on your purchases and expenses.
For non-GST-registered hosts, the scenario differs. You’ll still rent out the property for $100 per night, per night with Airbnb adding 15% GST, totalling $115 for the guest. As you are not GST registered, $6.50 (6.5% of $100) goes to the Inland Revenue, while $8.50 (8.5% of $100) is provided to you as a flat-rate credit, considered excluded income and non-taxable. Any claimed expenses will be at the excluding GST amount, with the GST portion being non-deductible.
Income tax returns:
You are required to report all your income and business expenses in your income tax returns. The flat-rate tax credits of 8.5% are not taxable. Whether you are GST registered or not, your Marketplace income and expenses should be recorded at the GST exclusive value. For those not registered for GST, any income or expenses received outside of the Marketplace should be recorded as GST inclusive.
Independent Airbnb managers / Marketplace Operators:
If you act as an intermediary between Airbnb and a host, or if you are a property manager operating your own website for bookings on behalf of hosts, you are considered a Marketplace Operator. In this capacity, you have two options:
Adhere to the Marketplace operator status and comply with GST regulations for all sales received through your website or Airbnb/similar platforms. Ensure that you inform Airbnb/similar platforms and obtain their acknowledgment that you are the supplier in this context and will handle the GST requirements.
Opt out as the Marketplace operator if you are a non-individual entity with supplies exceeding $500,000, or have 2,000 nights annually on at least one marketplace (e.g., Airbnb). To opt out, you must establish agreements with all Marketplace operators listing properties.
Next Steps:
This information may seem overwhelming, but we are here to assist you! If you require guidance on whether to register, de-register for GST, and how these changes may impact you, get in touch - sooner rather than later!
Phone us on 09 431 3068 or email us at support@mytwocents.nz.
