Airbnb Hosting: Nine Tax Basic Rules You Need to Know.
There are a few things about New Zealand tax you should be aware of when you enter into Airbnb, BookaBach or other peer-to peer renting. The following may help you when speaking to your accountant or may provide you a general guidance if you are preparing your tax return on your own.
Here are the nine must-know tax rules for peer-to-peer hosts:
- The money that you get from renting out your room, house or a bach is an income. You need to keep track of any income you receive in relation to your property short-term renting.
- From your income, you can deduct expenses that relate directly to your rental income such as advertising and cleaning. To be able to deduct expenses you will need to be accurate in keeping all receipts.
- If sometimes you or people associated with you privately use the property you will need to figure out how many days you used it and how many days your property was unused during a tax year. You will need this information when determining how much of your expenses you can deduct for income tax purposes. Depending on your circumstances you will use either mixed use proportion or standard income tax rules.
- You are not allowed to claim depreciation on your property. However, you can still claim depreciation on assets over 500 NZ dollars that are used in your rental activity such as beds or bigger appliances.
- If you manage your AirBnB property from your home you may be eligible to claim your home office expenses against your rental income.
- If your AirBnB income before deductions is $60,000 or higher in the last 12 months (or you suggest that it will be $60,000 or more in the next 12 months) you will need to register for GST and file GST returns. You will be able to claim GST from your purchases. There is always an option to become GST registered voluntarily whatever your turnover is. Read more information on tax consequences of becoming GST-registered.
- From 1 April 2019 ring-fencing losses legislation was introduced. In practice, that means if you make an overall loss from renting your AirBnB property you are not allowed to offset your loss against your other income. There are a few exceptions from this rule for example, if your property is a mixed use asset. You can read more on the ring-fencing losses here.
- Also, you need to know that some properties can not be sold tax-free. For determining your tax obligations, you need to take into consideration the date when the property title was transferred to you. From a legal point of view, this is when you became the owner of the property. If it happened before 1 October 2015, you will pay tax only if you bought the property with an initial intention to resell it. If the purchase took place from 1 October 2015 to 28 March 2018 inclusive you will be subject to tax if you sell the property within two years after the purchase date. From on or after 29 March 2018 the five-year period applies. These rules are called bright-line test.
- In some New Zealand cities such as Auckland and Christchurch hosts are required to pay commercial rates instead of residential rates. A peer-to-peer host needs to do their own research on local rates applicable to their situation.
The article is written by Valiya Gafarova, Certified Xero Adviser and Accountant at GECA Chartered Accountants. If you want to know more about tax consequences of having an Airbnb or other peer-to-peer rental feel free to get in touch with us on 0800 758 766.
Please note that this blog post should be considered as a general overview but not as a tax advice relevant to your situation.