If you use Airbnb to provide short-term accommodation in your house in which you also live, the IRD’s “mixed-use asset (holiday home)” rules don’t apply and guests are not classed as boarders. Except when you list a whole house which is vacant for 62 days each year, mixed-use asset rules do apply and calculations differ from those for homes where the hosts also live.

 Claimable expenses

Anything you spend as an Airbnb service provider may be claimed as an expense. For shared expenses, like power and Internet, claims need to be fair and reasonable.

You can claim some home utilities, rates, insurance, and interest – and all food and other consumables that guests use. You can also claim depreciation on chattels and appliances used by guests only. You can claim some depreciation on other shared chattels and appliances, like claiming a portion of utilities.

If you spend money to keep your property attractive for guests, you can claim some of those costs.

You’ll have to apportion expenses and, to do that, you need to know:

• The floor area used exclusively by Airbnb guests (say, 25m2)
• The shared area used by you and Airbnb guests (say, 90m2)
• Total of guests plus you and your family

“once you have registered for GST or deemed to be registered for GST, and for whatever reason decide to stop your Air BnB rental activity, then you will be required to de-register for GST and then pay GST on the market value of your property at the time of de-registration.”

Your apportionment calculation then is:

Guest floor area + (total shared floor area x [one divided by total guests plus family] x percentage of year you have guests). Then you divide that product by total floor area,
and the resulting figure is the apportionment percentage you use for expenses.

If your room or home was unavailable for part of the year, your calculations must reflect that.

Unlike residential rent, GST applies to Airbnb. You must register for and file GST if your turnover is $60,000 or more in the past 12 months, or will be $60,000 or more in the next 12 months.

Another very important thing to note is that once you have registered for GST or deemed to be registered for GST, and for whatever reason decide to stop your Air BnB rental activity, then you will be required to de-register for GST and then pay GST on the market value of your property at the time of de-registration.

There’s a lot to this, so we recommend that you get contact us to receive some professional tax advice.

The Tax Working Group in its final report released today is recommending a broad extension of taxing capital gains, and consideration of environmental taxes, changes to personal income tax thresholds, retirement savings, and charities.

A capital gains tax is a tax on the profit from the sale of an asset. 

“Tax the capital gain on sale of land, shares, business assets, intangible assets such as intellectual property. Tax to be imposed when the asset is sold, and levied at the seller’s marginal tax rate. Assets to be valued from when the tax is imposed.”

Among its main recommendations are:

• Tax the capital gain on sale of land, shares, business assets, intangible assets such as intellectual property. Tax to be imposed when the asset is sold, and levied at the seller’s marginal tax rate. Assets to be valued from when the tax is imposed. 

• The tax would NOT apply to the family home, and personal assets such as cars, paintings, jewellery, and household appliances. However, a holiday home WOULD be taxed on sale.

• The capital gain on shares in companies would be taxed but in some circumstances capital losses would also be able to be offset against other income. 

• The capital gain on the sale of a business would be taxed, including the goodwill. 

• Exemptions from capital gains to be granted for some “life events” such as relationship breakup, death. A family farm passed on to a family member would be covered by a rollover and there would be no tax on the capital gain. But if the family member then sells to a third party the capital gain would be taxed. 

• No changes to income tax rates, but a recommendation to raise the income threshold for low and middle income groups, i.e they would earn more at a low or lower tax rate. 

• No change to GST and no exemptions for certain types of products, such as food and drink. 

• Environmental taxes: changes to the emissions trading scheme to be more like a carbon tax. Dirty taxes on solid waste to reduce volumes to landfills. Taxes on water pollution and water extraction. Tax deductions to encourage conservation. 

• Taxation of fertiliser use. Consider congestion charges to tackle traffic issues. 

• Recommends government take steps to encourage retirement saving for low and middle income groups through possible refunds of employer’s super tax, reduce tax rate on some KiwiSaver investments. 

• Review taxation of charities to ensure the income from commercial activities are being used for the charitable causes they are being raised for. 

• Give Inland Revenue extra resources for administration and enforcement. 

Our Thoughts

The government is currently considering the Tax Working Group’s final report and will make a decision in April. So whilst there has been no confirmation that a comprehensive capital gains tax ( “CGT” ) will be brought right now, the government has signaled very strongly that a form of capital gains tax will likely to implemented. 

What is clear is that similar to other CGT regimes around the world, it is very likely that the family home will be exempted from being taxed on capital gains. 

Furthermore, the tax working group has recommended a valuation requirement for all capital assets on the date a CGT is introduced into law. This recommendation would mean that any gains made since purchase, up until the date of CGT introduction, shouldn’t be affected by the new CGT rules.

It is also useful to keep in mind that this new tax will only ever be on capital profits. A profit, even reduced by a tax, is never a bad thing so don’t pass up on a good investment opportunity just to avoid paying tax!

We think that it’s highly likely a CGT will be introduced in NZ, and once brought in, will not likely be repealed. However, we would be very surprised if it was introduced in full in its current format, as suggested by the Tax Working Group. We will be keeping a close eye on any further developments and will be informing clients of any matters that they should be aware of.