Airbnb - Tax Guide 2023 - New Zealand.docx

This guide has been prepared by an independent third-party law ﬁrm.

December 2022

NEW ZEALAND – TAX CONSIDERATIONS ON SHORT-TERM RENTALS

The following information can help you get started in learning about some of the tax

requirements that might apply to you when providing short-term accommodation in New

Zealand. For the purpose of this guide, short-term accommodation is the renting out of the

property to a person for up to 4 consecutive weeks at a time.

Tax can be complicated and it is important to ensure that you keep up to date with your tax

obligations and remain tax compliant. The timely preparation, ﬁling and payment of taxes are

your responsibility.

If you are supplying short-term accommodation in New Zealand, you should make sure that you

understand each of the following types of taxes, and pay the ones that apply to you:

1. Income tax, and

2. Goods and Services tax (GST)

Please understand that this information is not comprehensive, and is not intended to be legal

advice. If you are unsure about your local tax obligations, please check this with oﬃcial local

sources, or seek advice from qualiﬁed professionals.

This guide does not discuss the detailed income tax and GST rules which apply if the relevant

accommodation is a “mixed-use asset” (i.e., used both personally and for short-term rental

accommodation) but is unused/vacant for 62 days or more in total in a tax year (being available

for use for short-term rental does not count when the property is vacant for 62 days or more in

total). As the rules about claiming income tax and GST deductions relating to such

accommodation are complex, you should seek advice from qualiﬁed professionals as to how

these rules may apply to your situation.

Please note that this information is not updated in real time, so you should conﬁrm that the laws

or procedures have not changed recently.

We also draw your attention to the fact that Airbnb may have an obligation to report income

earned by users of the platform. Therefore, if there is a mismatch between the information

reported by Airbnb and the income you reported in your annual income tax return, the tax

authorities may ask you questions.

1. INCOME TAX

Income tax consequences of short-term rental

If you provide short-term rental accommodation in New Zealand, the rent you receive will

generally be taxable, reduced by the cost of tax deductible expenses relating to the rental

activity.

Expenses that are tax deductible (to the extent that the property is used for rental purposes)

include insurance and local authority rates, agents’ and marketing fees, repairs and

maintenance (not being a capital improvement) and accounting fees. Interest may also be

deductible, but the tax rules regarding the deductibility of interest have been changed with

retrospective effect from 1 October 2021 (see page 3 – “Changes to interest deductibility

rules”).

Non-deductible expenses include the purchase price of the property, repayments of any loan

principal, and the cost of adding to or improving the property (these are Capital Expenses).

Residential property deduction rules limit deductible expenses incurred on short-stay

accommodation in a tax year to the amount of income earned from the property, if the property

is not your main home or if the mixed-use asset income tax rules apply to the property. Any

excess deductions must be carried forward to the next tax year for deduction against

subsequent rental income, and cannot be used to reduce other income (e.g., salary or wages or

other business income). The discussion below about deductible expenses is subject to this

limitation.

Residential property available only for short-term accommodation and not used privately

You can claim all tax-deductible expenses associated with the rental activity against the rental

income.

Residential property (such as a holiday home) that is used both privately and also for short-term

residential accommodation and is vacant for less than 62 days in total in the tax year

You can claim all tax-deductible expenses that are only associated with the income-earning

rental activity against the rental income – and are not also or exclusively connected with the

private use. Private use of the property means use by you or your family, even if 100% market

rent is paid for that use, and use by persons with whom you are not associated under income

tax rules (e.g., friends and other non-family members) if you charge those persons rent at less

than 80% of market rates.

Expenses that are incurred both to earn income and for private use (“shared rental expenses”)

are, to the extent they are not Capital Expenses, tax-deductible only to the extent relating to the

rental activity. If the property is vacant for less than 62 days in the tax year, and you can provide

evidence that the property was available to be used as short-term rental accommodation when

vacant, those days will be counted as days relating to the rental activity in determining the level

of deductible expenses.

Example: Holiday home that is used for both private and short-term rental accommodation

and is vacant for less than 62 days in a year.

Holiday home is fully rented out as short-term accommodation for 300 days a year and is

also available for rent for a further 35 days a year (a total of 335 days). The holiday home is

used for private use for 30 days in the year.

NZ$7,000 of expenses are related only to the rental activity (such as Airbnb and property

management fees). You will be able to claim all of these expenses against the rental

income.

There are also NZ$3,000 of “shared rental expenses” (such as utility bills and local authority

rates). The shared rental expenses must be apportioned between private and rental use (and

availability for rental). The property was used or available for use for income-earning

purposes for a total of 335 days in the year, resulting in a usage rate of 335/365 or 91.8%.

The shared rental expenses must then be multiplied by the rental usage rate of 91.8% which

results in a tax-deductible expense of $2,754.

Therefore, the total amount of deductible expenses is $9,750.40 (7,000 + 2,754), assuming

the rental income is at least $9,754.

Note that if you are GST registered, then any GST charged on the expenses is to be excluded

from the income tax deduction – as you will be able to claim a deduction for the GST in your

GST return (see the discussion on GST below).

If part of the holiday home is not available to short-term accommodation guests and is kept

for private use at all times (e.g., a locked room used to store personal items), then the

calculation of shared rental expenses will be more complicated, involving an apportionment

of ﬂoor area as well.

Residential property (such as a holiday home, but not your main home) that is used for both

private and shor t-term accommodation purposes and is vacant for 62 days or more in total in

the tax year

The mixed-use asset income tax rules will apply. This guide does not discuss these rules further

and you should seek professional advice as to their application.

Main home (the place where you primarily reside) but occasionally rent out all or part of

You may calculate actual tax-deductible expenses or apply the short-stay standard-cost method.

The short-stay standard-cost method is only available to natural persons (i.e., individuals, and

not, for instance, companies) and then only where: (i) the main home is rented out for 100 nights

or fewer over the tax year (note that if you rent out one or more bedrooms (including the whole

house as applicable), each bedroom in your house is equal to 1 night – for example, if you have

a three bedroom house and rent it out for 1 night, it will be counted as three nights for the

purpose of this method); (ii) you are not registered for GST (discussed below); and (iii) the

property is not owned by a trust, or, if it is, you personally paid all of the costs for the property

for the relevant income year (e.g., insurance, local authority rates, etc.).

Under the short-stay standard-cost method, you can claim a ﬁxed nightly rate as a deduction

against your rental income (currently $55 if you are the homeowner). To the extent that you

charge guests up to this rate, you will have no income tax to pay. You will pay income tax on any

income received in excess of the ﬁxed nightly rate, with no deductions allowed for the actual

costs of items and services typically provided to short-stay accommodation guests (e.g.,

breakfast, linen, cleaning, power, internet, advertising and host service fees (e.g., Airbnb's

service fee)).

Changes to interest deductibility rules

From 1 October 2021, there are limits on the deductibility of interest relating to residential

property that is used exclusively for rental or is rented out some of the time and used privately

some of the time.

Broadly:

● if you obtained a loan in relation to the property on or after 27 March 2021, any interest

on the loan will be fully non-deductible from 1 October 2021; and

● if and to the extent you drew down on a loan prior to 27 March 2021, your interest

deductions on the amounts drawn down will be phased out between 1 October 2021 and

31 March 2025.

These rules have exceptions, such as for loan amounts ﬁrst drawn down on or after 27 March

2021 if an estate or interest in the property was acquired before that date. The rules are

complex and you should seek professional advice as to their application.

The rules will not apply if the interest relates to income you earn in your main home (such as a

bed and breakfast business in your home). You will still be able to deduct some interest against

that income.

Tax reporting in New Zealand

If you are not a provisional taxpayer (discussed below) you will need to complete and ﬁle a

rental income schedule (IR3R), along with any other required tax ﬁlings, and pay income tax on

an annual basis on the rental income.

If you are required to pay more than NZ$5,000 but less than NZ$60,000 of income tax at the end

of the tax year (such amount being your “residual income tax” or RIT) due to the derivation of

income that was not subject to withholding tax over the course of the year (such as rental

income), you will become a provisional taxpayer from the beginning of the following tax year

and, from that time, you will be required to pay provisional tax. If you pay the RIT (being less

than NZ$60,000) by the terminal tax date (being 7 February of the following tax year), no use of

money interest will be charged.

However, if you start your rental business and your RIT for the ﬁrst tax year of business is

NZ$60,000 or more, then you will be treated as a new provisional taxpayer for that year (and not

from the beginning of the next tax year). If you expect your RIT will be at least NZ$60,000 in

your ﬁrst tax year of business, you should pay provisional tax, most likely in one instalment but

possibly in one to three instalments (dependent on the start date of your business) for that tax

year to prevent use of money interest charges.

You must keep records to be able to calculate the income and expenses of your rental property

and for Inland Revenue to conﬁrm your accounts.

Reporting tax – ﬁling deadline

New Zealand’s tax year runs from 1 April to 31 March (although, with Inland Revenue approval,

in certain cases a person can have an income year that ends on a different date).

The income tax return ﬁling deadline is 7 July following the end of the tax year. This means that

the income tax return relating to income generated between 1 April 2021 and 31 March 2022

has to be ﬁled by 7 July 2022.

If you have a tax agent, you may have an extension of time to ﬁle up to 31 March of the following

tax year (meaning that the abovementioned deadline is extended from 7 July 2022 to up to 31

March 2023). The extension length issued to New Zealand tax agents can vary so you will need

to contact your tax agent to determine the relevant ﬁling date.

If you are non-resident during the entire tax year you will need to ﬁle an IR3NR form to report

your income from New Zealand sources.

Reporting tax – payment deadline

Payment due dates are provided on the return forms or in your myIR account. You can make

payments up to and on the due date.

If you are not a provisional taxpayer, your income tax payment will be due by 7 February

following the end of the tax year (e.g., the income tax liability for the tax year running from 1

April 2021 until 31 March 2022 has to be paid by 7 February 2023).

If you are a provisional taxpayer using the standard option with a standard balance date, you will

generally pay your three instalments on 28 August, 15 January and 7 May. However, if you ﬁle

GST returns on a two-monthly basis (or one-monthly), then you may qualify to use the ratio

option and pay provisional tax instalments with your GST return based on your level of taxable

supplies in the relevant GST return period.

If you have a tax agent, you may have an extension of time to pay your tax bill. The extension

length issued to New Zealand tax agents varies so you will need to contact your tax agent to

determine the relevant payment date.

GST

GST at 15% is currently charged on the supply of short-term rental accommodation that is

situated in New Zealand, only if the supplier is or is liable to be registered for GST. Note that the

supply of long-term rental accommodation is not charged with GST. As noted at the beginning

of this Guide, short-term accommodation is the renting out of the property to a person for up to

4 consecutive weeks at a time.

Do I need to register for GST?

If you are a supplier of short-term rental accommodation in New Zealand and the turnover (i.e.,

the rental charged) in any 12-month period exceeds, or is likely to exceed, NZ$60,000, you will be

liable to register for GST – whether the supplier of the accommodation lives in New Zealand or

outside of New Zealand. If your turnover is no more than NZ$60,000, you can voluntarily register

for GST. Refer to Inland Revenue’s website for information on how to register for GST.

I am registered for GST. How do I collect GST from guests?

If GST applies on the accommodation services you supply, e.g. if you are short-term rental

accommodation in New Zealand and registered for GST, you may set a 15% GST-inclusive

accommodation fee and account for GST on the GST-inclusive accommodation fee.

Filing your GST returns

If you are a GST-registered supplier and you are required to charge GST on your accommodation

supply, you are liable to ﬁle GST returns and account for GST output tax on the rental charged. A

supplier may charge a GST-inclusive accommodation price, i.e. increase the rent to include the

GST output cost.

A GST input tax deduction can be claimed for GST charged on any expenses incurred in the

course of carrying on the rental activity.

The GST output tax, net of the input tax, is payable to the New Zealand Inland Revenue. If input

tax exceeds output tax, a net GST refund can be claimed.

The ability to claim GST on expenses you incur on purchasing goods and services for use in

connection with the rental of the property, can be a reason for voluntarily registering for GST –

although it does mean that GST output tax will have to be accounted for. Advice should be

sought before voluntarily registering for GST as it can result in some net GST being payable on a

later sale of the property or other cessation of the rental activity, in proportion to the extent to

which the property was, while owned, used to make taxable supplies.

How the property is used for short-term renting will determine what GST expenses you can

claim (subject to the interest discussion above):

How the property was used

GST you can claim

All the property is rented out and there is no

private use

You can claim GST for all your short-term

rental expenses.

A room or part of the property is rented out

and the rest of the property is only for

private use

You can claim GST on all expenses incurred

in providing the short-term rental

accommodation but, as noted above,

claiming GST deductions can result in some

GST being payable on a later sale of the

property or if you cease to rent part of the

property. If you wish to claim GST, you must

split shared rental expenses based on the

days the property was used for short-term

rental and claim GST on that basis. You

cannot claim GST on private use expenses.

All the property is rented out some of the

time and all of the property is used privately

for some time, but is vacant for less than 62

days in the tax year

You can claim GST on all expenses incurred

in providing the short-term rental

accommodation but, as noted above,

claiming GST deductions can result in some

GST being payable on a later sale of the

property or if you cease to rent part of the

property. You must split shared rental

expenses based on the days the property

was used for short-term rental and claim

GST on that basis. You cannot claim GST on

private use expenses.

All the property is rented out some of the

time and all of the property is used privately

for some time, but is vacant for 62 days or