Update for Airbnb owners who are not GST registered
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GRA Blogs
Articles by Anthony Strevens.
Key Takeaways
- Non-GST-registered Airbnb hosts get a flat-rate credit of 8.5%, which isn't taxable income.
- Under this system, expense deductions must be claimed on the GST-exclusive amount only.
- A proposed change would let owners include the credit as income to claim full GST-inclusive expenses instead.
- Whether that's worthwhile depends on whether GST paid on expenses exceeds the flat-rate credit received.
In November 2023 I wrote a blog about the new GST rules being applied for Airbnb properties listed through online marketplaces. You can find this here.
There has since been an update to this that will make life marginally simpler for those owners who are not GST registered. In my blog I described the “flat-rate credit”, which is the 8.5% amount that will be paid by online marketplaces such as Airbnb to non-registered owners. I also described the tax effect of this credit as follows:
Do I have to pay income tax on the $17 flat-rate credit?
No, you do not. The $17 flat-rate credit is not taxable income. The catch is that a full deduction cannot be claimed for the GST inclusive costs associated with the short-term stay activity.
For example, if you spend $2,300 on property insurance, up until now you would have claimed a deduction for income tax purposes as a non-GST registered owner on the GST inclusive cost of $2,300. Under the flat-rate credit scheme, your deduction for income tax purposes is based on the GST exclusive amount. With GST at 15% the calculation is $2,300 / 1.15 = $2,000. (You claim $2000, not $2300 for income tax.)
Flat-rate credit update
The update is that you will now have the option to choose to include your flat rate credit as taxable income. If you do so, then you can claim the GST on your expenses as a tax deduction. So in the above example you would claim $2,300 as the insurance expense.
This may or may not work out in your favour depending on whether the GST you have paid on your expenses is greater than the flat rate credits you have received. However, it certainly makes the accounting and tax calculations much simpler for non-registered owners.
It’s important to note that while this is not yet passed into law, there is no indication that it would not be, and as per usual GRA are ahead of the game and bringing you the future of property investment before it arrives. If passed, it is effective from 1 April 2024 (i.e. the 2025 financial year).
If you have any questions about this 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).
FAQ
Do I pay income tax on the Airbnb flat-rate credit if I'm not GST registered?
No – the flat-rate credit (8.5% of the booking amount) is not taxable income for non-GST-registered owners.
How do I calculate my tax deduction for expenses if I receive the Airbnb flat-rate credit?
Under the standard flat-rate credit approach, deductions are based on the GST-exclusive cost of expenses (divide the GST-inclusive amount by 1.15), not the full GST-inclusive figure.Can I choose to include my flat-rate credit as taxable income instead?
Under a proposed rule change, yes – opting in would let you claim the full GST-inclusive amount on expenses, though whether this is worthwhile depends on your specific GST paid versus credits received.Is it better to include the flat-rate credit as income or keep it tax-free?
It depends on your numbers – if the GST you've paid on expenses exceeds the flat-rate credits you've received, opting in may work in your favour; otherwise, the standard tax-free treatment may be simpler and better.
Anthony Strevens
Partner
© Gilligan Rowe & Associates LP
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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
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