At a recent seminar on technological disruption in the business environment, an interesting fact was that in 10 years, Airbnb had gathered the same number of beds as the Marriott hotel chain (the 3rd largest in the world at 1.33million), but the Marriott chain started in 1927. But the question now arises as more people are looking to capitalise on the new trend and help the increasing cost of acquiring and maintaining property, what are the tax consequences of the alternative rental arrangements?
The first option is borders – which is encapsulated under the IRD determination 19/01. To apply, the host must be a natural person, not have more than 4 borders at the same time during the course of the income tax year, and not provide boarding as part of a GST taxable activity. Generally, if the weekly board is under $186 then the income derived will be tax free. Over that, there are other factors to take into account and specific advice should be sort.
The second option is short-term stay, which is similar to Airbnb, and is where other parts of the property are rented out to supplement housing costs but is not a business. This option is covered under IRD determination 19/02 and to apply the tax payer needs to be an individual, rent out rooms in their home, not rent out rooms for more than 100 nights a year, and is not part of a GST taxable activity. The standard cost per night is $50 and if the accommodation cost is greater than $50, may result in taxable activity.
Airbnb activities that are in line with the Marriott concept, where the property is used entirely for the provision of short-term accommodation rather than as a residential rental property, this will be treated as a business activity and the costs associated with providing this service will be offset against the income derived, much as you would expect with traditional rental income.
GST does not apply to residential rental, but short-term accommodation (being accommodation provided for no more than four consecutive weeks) is not residential rental. Therefore, if the amounts received from short-term accommodation exceeds $60,000 in a 12-month period, the income is subject to GST. This gets complex and advice should be sought around your specific circumstances and professional advice should be sort.
As the Marriott chain plans to expand, so too are the number of properties that are coming under the Airbnb umbrella. Professional advice should be taken to your individual circumstances as this becomes an area for IRD to start investigating.