Firstly, a reminder that the provision of accommodation in a dwelling is still exempt from GST when the dwelling is let for permanent occupation. If, however, the property is used for short-stay accommodation, this does constitute a taxable activity for GST.

If the turnover from this activity exceeds $60,000, GST registration is compulsory. Under this threshold it’s voluntary. The question of whether to register or not depends on the circumstances, but always remember that once registered for the activity, GST is payable if you cease or dispose of the asset.

In Queenstown, the council has adopted a resource consenting regime to require short-term accommodation providers to obtain visitor accommodation consent. This can be granted to allow 90, 180, or 365-day visitor accommodation consent nights.

Property Value

Gaining this consent certainly impacts the value of the property. It’s not straightforward and the council looks hard at each application and considers the impact on neighbours and others.

In most instances where a VA365 consent is in place, the vendors will be GST registered. This generally means properties such as this are marketed on a plus GST if any or zero-rated basis.

So, where a buyer provides a purchaser warranty they will be registered on settlement and they intend to use the property in a taxable activity, and that it will not be their principal place of residence, the sale will be zero rated. This avoids the vendor charging 15 per cent GST on top of the contract price but leaves the purchaser without GST to be refunded.

In my own case, despite having VA365 consent, the vendor had opted for a permanent tenant and was unregistered, so it certainly pays to check the vendor’s status. This then meets the second-hand good criteria where I will introduce the property to a taxable activity for the first time and so pick up a 15 per cent GST input tax claim on settlement.

So, the new GST marketplace rules now require platform providers like Airbnb who sell accommodation to charge GST on this accommodation regardless of whether the property owner is GST registered or not. This has created confusion given some owners are registered and some aren’t.

Paying Twice

If you are registered, you now account for your rent receipts as zero-rated supplies in your own returns as Airbnb has already paid the GST collected on your behalf. If you standard rate these supplies in your return you will effectively pay twice. You can continue to claim input tax on your costs.

For those who are unregistered, where Airbnb have nonetheless collected 15 per cent GST, an 8.5 per cent credit is given to compensate the owner for not being able to recover GST on costs.

This leaves 6.5 per cent passed directly to IRD by the platform provider.

In Queenstown they noticed an immediate drop-off in traffic through Airbnb rentals when this new tax was introduced on April 1.

Some owners have responded by reducing their tariffs to compensate for the higher prices those looking to book now face.

Managers are also expected to track owner usage through the properties and GST-registered owners should be warned IRD will be looking to managers for these records in an audit blitz next year to determine if owners have correctly made GST adjustments for private use. You have been warned!

Mixed-Use

At an income tax level, interest is again deductible regardless of new build status, but all claims are subject to the mixed-use asset rules that apply where properties are rented out and used for the owner’s private use. In this situation a record of nights booked, and nights of personal use, must be kept as overall deductibility is determined by the proportion of booked nights to overall usage nights.

So, if you use it 50 nights and it’s rented 100 nights, your deductibility is 100/150.

The fact the property is available for rent, but is vacant, now counts for nothing. Letting to family and friends where the rent is less than 80 per cent of market value is considered a private use night and the income is excluded from taxable income.

So, there is much to understand now about the GST and income tax quirks of short-term letting. Take advice before you step into this arena.

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