NZ Hosts - Summary of recent tax changes & proposals

[Ben551]

Dear all~

I wanted to post a short message for New Zealand hosts, to ensure you all have visibility of proposed changes to the tax landscape for short term rentals, including Airbnb. 

These changes have all been proposed in a very short space of time (within the last month, some even only last week) so many hosts are finding it hard to keep up with "what is what".  Some people are confusing the changes as all the 'same thing', when they are 'three separate things'.  I will do my best to summarise, however I'll leave it to you to read the information carefully.  If you want to understand it better, I recommend you consult with your accountant.

Much of this will mean higher taxes for STR hosts, but please don't shoot the messenger!  The good news is that some of it is only proposed and has not happened yet - so there is hope it will change. One change may or may not happen in a couple of years (number 1) and the impact could be significant, one change happens within a month (number 2) and could be a good thing for low volume hosts, and the last change (number 3) has already happened.

1. Capital Gains Tax

- The Tax Working Group returned their Final Report last week.

- If approved, Capital Gains Tax at 33% will take effect from 1 April 2021

- Page 12 proposes situations where capital gains will apply to Airbnb hosts (see below)

- To avoid capital gains, Airbnb hosts can forego claiming tax deductions for property expenses (and pay higher income tax)

2. IRD Allow Set Costs Deductions

- The NZ Inland Revenue Department (IRD) publised an exposure draft last week on short-stay accomodation and boarders

- The overview is here: https://www.ird.govt.nz/resources/6/e/6ee71ab2-fb30-4fb2-980b-50a9dc59d168/pub00303-overview.pdf

- The proposal is open to public comment until 22 March 2019 and, if approved, will take effect from 1 April 2019 (soon!)

- Changes proposed include allowing hosts who rent rooms for less than 100 nights per year to claim a flat $50 per night expense deduction against their income, instead of making deductions for actual costs (optional)

- There are a number of other things proposed, so I recommend reading fully to understand how it might affect you

3. Auckland Council introduce Business Rates

- The council have extended business rates to apply to accomodation provides such as Airbnb

- The changes apply from 1 July 2018 (were back dated for some hosts)

- Those who book less than 28 nights per year are exempt and do not have to pay the APTR tax.

- Those who book 29 nights or more are subject to a tiered scale of business rates.

- The picture below gives a good guide of how much this will cost hosts.

- More information can be found here

Lastly, to reiterate - the changes listed above relate to New Zealand hosts, so this post is to help the NZ hosting community understand the recent news a bit better.  It has been hard to follow for most people, so my advice is don't read the news coverage, read the source documents and raise questions with your accountant.

Lastly, hosts from other countries are of course welcome to comment!

[Ben551]

PS: there is one more change that I didn’t list (my apologies), but it was labelled as a bill for Airbnb themselves so I missed it.

4. Proposal to tax Airbnb on their platform service fees

The NZ government (the prime minister) have also announced plans to go after online service providers directly. They named “Airbnb” as just one of the places they will target, ensuring that if they are making income off New Zealand assets (I.e. housing stock) they will be paying tax in New Zealand on that income.

In simple terms:  this means the NZ tax man is gunning for the Airbnb platform, as well as the hosts, and intends to tax Airbnb on its service fees. I see a rather large bill heading their way in the near future!

[Ann72]

@Ben551, I actually think that's perfectly appropriate.  Airbnb certainly should pay tax on that income.

[Ben551]

@Ann72  oh yeah, most people agree with that too.  At the moment the money is leaving the economy like an imported product, which doesn't make great economic sense.  Same is true for a lot of overseas, online service providers selling products to NZ.  Most countries already have tax law in place to protect against this, but NZ is a bit behind the curve.

[Terri38]

Thank you for posting that. 

Submission... will ... be made... 
I will have to do some serious number crunching (using last year's figures as a ball-park)  as I have a horrible suspicion that the new rules are going to cripple me financially if I keep hosting.

It's all well and good to be able to claim X, Y and Z as tax deductibles, but that really only helps at tax refund time (if that ever comes) but you still have to pay them throughout the year first!

A flat tax rate, (maybe 5%?) on AIrBnB earnings would hit hosts equally.  In general, any AirBnB tax based on property value is going to hit those of us in expensive places more than those hosting in more sensibly-priced towns and cities.

[Mark116]

@Ben551  This seems pretty onerous at first glance.  I'm not sure why the gov. would prefer to house tourists in hotels and then have to build new hotels when they can house them in existing housing stock that also provides a huge financial benefit for the property owners.  Seems very unfortunate.