Airbnb and GST

If you rent your bach out for short term stays (such as through Airbnb, Bookabach, or a similar platform), and you earn $60,000 of income from this in a twelve month period, you are required to register for GST.  What’s more, this is measured over any twelve month period, not over the April to March tax year.

What does this mean for you?  

First of all, once you are registered it means that you need to charge GST at 15% when you rent your property out, and then you need to pay this to the IRD.  If you can put your price up to cover this, great.  But if you can’t increase your price, this effectively has to come out of your pocket.

On the plus side, you can claim GST back on most expenses that you incur that relate to renting the bach out for short term stays.

But that’s not the big risk.

The really big risk is connected to the GST on the property.  You can usually claim back the GST on the amount that you paid for the property, but when you sell or change the use of the property, you have to pay GST on either the sale price or the market value.

If you bach has gone up substantially in value during the time you’ve owned it, this could be a large amount of money.  For example, if you purchased your bach for $300k, you would get $39k back in GST.  But if it’s worth $1m when you sell, you’d pay $130k when you sell.  Overall, you’ve pay net $91k in GST.

What should I do?

It’s essential you get the right structure in place before you get close to the $60k threshold.  You need to consider whether you  carry out other taxable activities that would also count towards the $60k threshold.  

Need assistance?  Don’t hesitate to contact us for a free initial discussion to work through your situation and talk about how we can help.