Carmen Horn
July 3, 2024
When you rent out your property on Airbnb, the income generated is considered taxable in New Zealand. This means that you are obligated to declare the income and pay taxes on it. The Inland Revenue Department (IRD) is responsible for administering and enforcing tax laws in New Zealand, and they expect individuals to comply with the tax obligations associated with short-term rentals.
In addition to income tax, hosts on Airbnb may also have to consider the Goods and Services Tax (GST). GST is a consumption tax imposed on the supply of goods and services in New Zealand. It is currently set at a rate of 15%.
Whether or not you need to register for GST as an Airbnb host depends on your rental income and the nature of your rental activities. If your annual turnover from renting out your property on Airbnb exceeds the GST threshold, you will be required to register for GST and charge GST on your rental income.
The GST threshold for rental income is $60,000 per year. If you earn less than this amount from your Airbnb rental, you are not required to register for GST. However, if your annual turnover exceeds $60,000, you must register for GST within 21 days of reaching the threshold.
It's important to note that the $60,000 threshold applies to the total turnover from all taxable activities, not just Airbnb rentals. If you have multiple sources of income or engage in other business activities, you need to consider the combined turnover to determine if you meet the GST registration threshold.
If you meet the GST registration threshold, you must register for GST with the IRD. You can do this online through the IRD's website or by completing a paper application form. Once registered, you will be issued a GST number and will be required to charge GST on your rental income.
As a registered GST taxpayer, you will need to file GST returns with the IRD regularly. These returns will outline the GST collected from your rental income and the GST you have paid on expenses related to your Airbnb hosting. It's important to keep accurate records of your income and expenses to ensure accurate reporting and compliance with GST requirements.
For those of you who are not registered for GST, Airbnb will still charge 15% GST for any accommodation you provide and then give you back 8.5%. This will mean that only 6.5% of this GST payment will go to the IRD (although this is still more than before as previously no GST was payable). If you have an Airbnb, you should be aware of the GST charge that Airbnb withholds on your income and the implications of these GST changes. You should expect to receive a reduced amount of income from the Airbnb platform as Airbnb withholds the GST on your behalf.
You don’t need to declare the output GST on your GST return in addition to the GST withheld by Airbnb as this would mean you’d be paying double GST (ouch), but you should still include the income amount received from Airbnb under the zero-rated box of your return. GST deductible expenses should still be included as usual.
When it comes to income tax, Airbnb hosts are required to report their rental income on their annual tax return. This includes income earned from short-term rentals listed on Airbnb. The income should be declared under the "Rental Income" section of the tax return.
It's important to keep detailed records of your rental income, expenses, and any applicable deductions. This will help you accurately calculate your taxable income and minimise your tax liability. Common expenses that can be deducted include cleaning fees, maintenance costs, insurance premiums, and advertising expenses.
As an Airbnb host in New Zealand, you are entitled to claim deductions for expenses incurred in relation to your rental property. These deductions can help offset your rental income and reduce your taxable income.
Some common deductible expenses for Airbnb hosts include:
It's important to note that deductions can only be claimed for expenses that are directly related to your Airbnb rental. Personal expenses, such as mortgage interest, are not deductible.
In addition to income tax and GST, Airbnb hosts in New Zealand may also need to consider the Bright-line rule when it comes to property sales. The Bright-line rule is a tax provision that applies to residential properties bought and sold within a certain timeframe.
The Bright-line property rule has recently been reduced back to a period of two years for properties sold after 1st July, 2024. This means for any property sold after July 01, 2024, any profits that are made will only be taxable if the property in question has only been owned for less than two years. It's important to consult with a tax professional or the IRD to understand the specific implications of the Bright-line rule on your Airbnb rental property.
Failure to comply with the tax obligations associated with Airbnb hosting can result in penalties and interest charges. The IRD takes tax compliance seriously and has measures in place to ensure individuals meet their tax obligations.
If you fail to register for GST when required or fail to declare your rental income for income tax purposes, you may be subject to penalties and interest charges on the unpaid tax. These penalties can be significant and can have a negative impact on your financial situation.
Renting out your property on Airbnb can be a lucrative way to earn extra income in New Zealand. However, it's crucial to understand the tax implications and comply with the legal requirements to avoid any potential issues down the line.
Here are some tips to help you manage your tax obligations as an Airbnb host in New Zealand:
With proper planning and record-keeping, you can enjoy the benefits of hosting on Airbnb while staying on the right side of the law, and earn that extra moolah to spend on your family holidays. If you have several properties that you airbnb as a small business, and would like a sounding board to talk all things accounting, tax, rentals and more, get in touch here. We're here to help take care of all your small business accounting needs, so you can get on with the parts of business that you enjoy the best!
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