NEWS

The Complete Guide for Airbnb & Holiday Home Owners

GST and short-term rentals are no longer simple.

Between the definition of commercial dwellings, the marketplace rules introduced from 1 April 2024, registration thresholds, apportionment rules, change-of-use adjustments and exit implications, many property owners are exposed to GST consequences they do not anticipate — particularly on sale.

If you operate an Airbnb, Bookabach, or other short-term accommodation, understanding your GST position is essential.

This guide outlines the key rules.

 

1. Is Your Short-Term Rental a Taxable Supply?

Supplies fall into three categories: taxable, exempt, or non-taxable.

A short-term rental will generally be taxable if it qualifies as a commercial dwelling. A commercial dwelling includes hotels, motels, inns, hostels, boarding houses, camping grounds, convalescent homes, nursing homes, rest homes, hospices, or establishments similar to these.

Where a building is occupied as a dwelling and is not a commercial dwelling, the supply relating to that dwelling is generally not subject to GST. Dwellings include residential homes, flats above shops, houses attached to factories, and farmhouses.

 

2. Marketplace Supply Rules (From 1 April 2024)

Electronic marketplace operators such as Airbnb and Bookabach must charge and return GST on taxable accommodation supplied through their platforms.

Where the owner is not GST registered, the platform charges GST and pays the owner an 8.5% flat-rate credit. The supply does not count toward the owner’s GST registration threshold.

Larger operators may opt out if they meet certain turnover or night-supply thresholds. Listing intermediaries cannot opt out.

 

3. When Is Short-Term Rental a Taxable Activity?

Under section 6(1) of the GST Act 1985, a taxable activity is any activity carried on continuously or regularly that involves supplying goods or services for consideration.

Short-term rental typically involves supplying accommodation for payment on a recurring basis. Once carried on regularly or continuously, it will usually meet the definition of a taxable activity.

Renovation periods prior to letting may create risk if IRD considers the activity has not yet commenced.

 

4. Time of Supply

GST is generally triggered at the earlier of when an invoice is issued or when payment is received.

For short-term rentals, upfront booking payments typically trigger GST at payment date. Deposits held by stakeholders and associated party transactions require careful consideration.

 

5. GST Registration

Registration becomes compulsory where taxable supplies exceed $60,000 in a 12-month period or are expected to exceed that amount.

The threshold is calculated on gross rental income before commissions and expenses. Other taxable supplies must also be included but the 8.5% flat-rate credit is not included.  

Voluntary registration is possible but carries long-term consequences, particularly on sale.

 

6. Retrospective Registration

If the threshold is exceeded and registration does not occur, IRD may backdate registration to when liability first arose.

IRD considers factors such as genuine belief, reasons for not registering, ability to verify output tax, compliance cost differences, and administrative impact.

 

7. Deregistration & Deemed Disposal

If all taxable activities cease, deregistration is required.

On deregistration, retained assets are deemed to be disposed of at market value. Output tax may be payable even if no actual sale occurs.

 

8. Apportionment & Change of Use

Where properties have mixed use (private, short-term rental, long-term rental), GST must be apportioned.

Apportionment affects purchase price, renovations, operating expenses, and ongoing change-of-use adjustments.

 

9. No taxable activity Election

In limited circumstances, a sale may be treated as not being made in the course of a taxable activity if strict criteria are met, including no prior input tax claims, not used for the principal purpose of making supplies, not acquired as a zero-rated going concern or supply of land and generally applies to new properties purchased with no intent of taxable supply.

The election is made by not charging GST and not returning the sale as a taxable supply.

 

Final Thoughts

The greatest GST exposure for many short-term rental owners arises not during day-to-day bookings, but on registration, change of use, deregistration, or sale.

GST planning should be undertaken before decisions are made, not after IRD review.

 

Disclaimer

This information is intended to provide general advice only. We recommend you discuss your specific situation with your Accountant.