Short-term accommodation providers, like Airbnb and Bookabach, now qualify for a COVID-19 tax break from the Inland Revenue Department (IRD).
To be eligible for this tax exemption, short-term rental providers must have registered for GST and be forced into closure due the novel coronavirus pandemic. In addition, they must also inform the IRD via email and reopen for a short-term basis within 18 months.
Previously, those who rented out properties on a short-term basis and ceased operation due to the pandemic were still subject to GST on the property and on other assets used to run the business. In response to this, hundreds of property investors initiated a shift to long-term residential offers, in order to maintain cash flow.
Maggie Jaques, a Nexia New Zealand tax director, said that if short-stay vacation homes are rented as long-term residential accommodation, they will each now be classified as a sale at its market price – thereby incurring a GST payment. For example, for a house worth $600,000, the applicable GST would amount to $78,000, she explained.
“What’s interesting is that a lot of people don’t realise they’ve even got that problem” – referring to the GST tax bill – “and may not have realised they even needed the concession,” she said.
For both short and long-term accommodation, the novel coronavirus has caused major confusion in the industry. The IRD has not shared the number of businesses that have made this switch between these two types of accommodation rentals.
In order to tackle additional economic complications from COVID-19, the government has granted the IRD with the authority to introduce other measures and policies of this kind.