With the up and coming GST tax changes rolling out on April 1, 2024, impacting those offering lodging or ride-sharing services through online platforms like Airbnb, Booking.com or Uber it’s timely to recap on what the changes are.
Understanding the New Legislation
Currently, service providers enjoy GST exemption if their turnover is below the $60,000 GST registration threshold. However, a new legislation set to take effect in April 2024 brings about significant changes. Regardless of the GST registration status of the property owner or driver, this legislation mandates GST on accommodation and transport services facilitated through electronic marketplaces.
This change introduces a fresh category known as 'listed services,' covering commercial, short-stay, and visitor accommodations (think Airbnb and Bookabach), as well as ride-share and food/beverage delivery services (like Uber and Ola).
Under this shift, the electronic marketplace is recognised as the service provider, bearing the responsibility to collect and remit 15% GST on all services provided to end-users through their platform.
Transactions between the electronic marketplace and a GST-registered property owner or driver are zero-rated for GST. For example, if Ronald, a GST-registered individual, rents out a property via Airbnb for $200 a night, Airbnb charges guests $230 (including GST) and remits $30 GST to the Inland Revenue. The transaction between Airbnb and Ronald is zero-rated.
For property owners not GST-registered, the electronic marketplace deducts 8.5% input tax from the taxable supply, passing this credit to the owner. This flat-rate credit approximates the GST that could be claimed if they were GST registered.
Opting Out for Larger Commercial Operations
It's worth noting that larger commercial enterprises providing over 2,000 nights of short-stay accommodation annually through a marketplace have the option to opt out of the new rules. This can be done by entering into an agreement with the marketplace operator, allowing them to retain responsibility for their own GST obligations.
We understand that these changes may raise questions, and we're here to help navigate through them. Feel free to reach out if you have any queries or need further clarification on 07 578 5416 or contact kristen@graceteam.co.nz.