Airbnb Short-term Letting

Airbnb Short-term Letting

Whilst the provision of residential accommodation in a dwelling is GST exempt, the letting of a property for short term holiday stays is a taxable activity for GST. GST registration is not compulsory provided the taxable supplies fall below $60,000 which often means registration is an elective choice for those providing short-term accommodation. Whilst claiming GST on a property acquisition may seem like a great option, this of course means that the subsequent on sale of the property will be subject to GST which could be substantially higher than the amount claimed if the property has appreciated.

The rents charged to guests will also be subject to GST which in most cases is a cost the owner will need to absorb rather than charge on to guests.

Be aware that if you intend claiming GST on a property this is a material factor with respect to finance, as the obligation to pay GST on the sale trumps even the mortgagees rights to recover lending, so it is a material disclosure point to a lender who will almost certainly require any GST refund to be applied against the mortgage.

When considering the compulsory GST registration threshold, realise that the $60,000 is entity specific not property specific. So, if the sum of all taxable supplies exceeds $60,000 registration becomes compulsory.

Consider this example;

John has owned a bach on Waiheke for twenty years in his trust. He earns about $50,000 from renting it night by night to holiday makers. In the twenty years of ownership, it has increased in value by more than $1,000,000. John’s trust is not GST registered because the income from the bach is under $60,000. John now decides to buy a commercial carpark as an investment which earns $15,000 per year and opts to put this in trust as well. John opts to keep the trust unregistered because the rent from the carpark is also under $15,000. When John’s accountant does his books, he delivers John the bad news that because the aggregate rent from the bach and the carpark is over $60,000 the trust is forced to GST register. John can only recover GST on the Cost of the bach but has to now accept that when he sells it, GST will apply to the full sale price including the $1,000,000 capital gain he has had over twenty years. Ouch!

Are you being chased by Inland Revenue?

The new Inland Revenue computer system has a habit of targeting people who have never filed a tax return in the past you will be asked to submit a return or provide further information don’t ignore this request contact Inland Revenue and ask the reason for the request in most cases the customer service people will be able to deal with the issue and put your mind at rest

Computer security

While many people feel they have nothing to hide, they forget that they can effectively become a pawn in a larger attack on something that is important. I’m sure the patients affected by the DHB hack didn't want there personal information sold online, or their appointments disrupted. So we must all take responsibility to help the community, you're still washing your hands properly to minimise the risk of spreading viruses aren't you? This is a rabbit hole of a topic, so things here are a little shallow. However, feel free to google “Zombie (computing)”

How Strong

In recent weeks we have seen a number of people in the office with very basic passwords. This is disturbing, while having a beloved pet with a random number might seem strong for example Fido1786 this would take a computer about 14 minutes to hack. Random numbers and characters are normally best, an easy way to remember some is pick a song line and take the first letter of each word. oMDhaf is 12 days and is a simple nursery rhyme most people should have heard, even if your last name isn't McDonald.

Go check a password. You can just google how secure is my password. Our personal favourite is https://www.my1login.com/resources/password-strength-test/ remember you should probably tweek your real password just in case anyone records it.

Password Manager

While it is easy to remember a couple of passwords, maybe you have too many, you could consider using a Password manager. Maybe Keychain if you are an apple user. Other options can include my1login, lastpass or any of the hundreds available online, or in the app store. Just done use your internet browser to remember them 

Multi Factor Authentication (MFA)

If you want the gold standard in password security, turn on MFA (also known as two factor authentication. There is a good chance, you have used this without knowing what it was. Like when you first setup online banking and got a code text to you to confirm it was you. It is pretty hard for a hacker to be holding your phone when they want to access your personal banking.

HAVE WE GOT YOU THINKING?

Give us a call on (04) 563 6965 or email: dennis@taxman.co.nz or shawn@taxman.co.nz

Keep an eye out for  September’s article!

A Reminder 28 August 2021  !st Provision Tax Payment date...