Articles by Anthony Strevens
Anyone who provides lodging or ride-sharing services through an online marketplace in New Zealand, such as Airbnb or Uber, will be affected by new Goods and Services Tax (GST) changes starting from April 1, 2024.
Note that earlier this year, the National Party expressed its intention to repeal this change. However, it is not part of the published “100 day action plan” so it will be interesting to see what comes out of coalition negotiations and whether this remains in place. Currently it is law, so it’s important for those it will potentially affect to have an understanding of what it is.
What is the new legislation?
Presently, service providers are exempt from GST if their turnover is below the $60,000 GST registration threshold. However, the new legislation coming into effect on 1 April 2024 mandates GST on accommodation and transport services facilitated through electronic marketplaces, regardless of the GST registration status of the property owner or driver.
The legislation introduces a new category of services called 'listed services’, encompassing commercial, short-stay, and visitor accommodations (like Airbnb and Bookabach), as well as ride-share and food/beverage delivery services (such as Uber and Ola).
Under this change, the electronic marketplace is considered the service provider and is obligated to collect and remit 15% GST on all services provided to end-users through their platform.
Transactions between the electronic marketplace and a GST-registered property owner or driver are zero-rated for GST. For instance, if Ronald, a GST-registered individual, rents out a property via Airbnb for $200 a night, Airbnb charges guests $230, including GST, and remits $30 GST to the Inland Revenue. The transaction between Airbnb and Ronald is zero-rated.
If the owner is not GST-registered, the electronic marketplace deducts 8.5% input tax from the taxable supply and passes this credit to the owner. This flat-rate credit is meant to approximate the GST that could be claimed if they were GST registered.
Larger commercial operations can opt out
It’s important to note that large commercial enterprises providing over 2,000 nights of short-stay accommodation annually through a marketplace can opt out of the new rules by entering into an agreement with the marketplace operator. This allows them to retain responsibility for their own GST obligations.
In summary, GST-registered owners should see no change in their financial situation. Non-registered individuals will need to declare additional income in their tax returns due to the flat-rate credit. This is because they will receive that extra credit in cash, resulting in a net increase in revenue (assuming no changes in sales/bookings).
If you require assistance in understanding the impact of this new GST rule, please contact your GRA CSM, or if you are not a client, request a meeting to see how we can help (the first meeting is free to new clients).
I got a lot out of Property School, the main things being the context of the process, i.e. choosing a vision, plan & how to execute; easy to implement value adds like S & P Clauses and Life online; and great case studies that bring the teaching to life. I really enjoyed being challenged to think about which strategy, and all the presenters were very helpful and informative. I will be recommending Property School to others. Thank you! - Chuck - June 2017
Investing in residential property?
If you're investing in residential property, seeking to maximise your ability to succeed and minimise risk, then this is a 'must read'.
Matthew Gilligan provides a fresh look at residential property investment from an experienced investor’s viewpoint. Written in easy to understand language and including many case studies, Matthew explains the ins and outs of successful property investment.