The gig economy, or platform economy, in New Zealand is set to get a tax shake up. The government is proposing changes to how GST is accounted for on the supply of services such as Airbnb accommodation and ride sharing platforms like Uber.
Currently individual service providers, such as Airbnb hosts and Uber drivers, are responsible for levying GST on their services if their income is above $60K/annum. Many providers fall under the $60K threshold and do not have to register for GST or levy GST on their services. This, many argue, gives smaller operators an unfair advantage over larger operators.
GST for all
The Taxation (Annual Rates for 2022-23, Platform Economy and Remedial Matters) Bill (No. 2) proposes that from 1 April 2024 digital platform providers themselves to levy GST on all sales regardless of the individual sellers’ GST registration status.
The rationale behind the Bill is to level the playing field, reduce tax non-compliance and shift the burden of GST to the digital platform provider.
How it works – an example
The platform providers, such as Airbnb, will need to levy GST on purchases through their platforms where the service suppliers are not GST registered. The platform providers would then need to pass on just over half of the GST they collected back to the individual suppliers as a flat-rate credit.
Here’s how it would work:
Bob is an Airbnb host in Queenstown but as he earns under the $60K/annum threshold, Bob is not registered for GST purposes.
Mary books accommodation through Airbnb from Bob for $200 excluding GST.
Airbnb will need to do the following for this transaction:
- Collect GST of 15% ($30)
- Deduct input tax of 8.5% of the $30 GST and pay $17 to Bob as a flat-rate credit
- Pay the remaining $13 to Inland Revenue as the net GST collected on the supply.
What’s not changing
As far as we know so far, under the new legislation, there will be no change to these existing rules:
- If you earn over the $60K/annum income threshold you will still need to register for GST and levy GST in the usual way.
- Under current rules, if you are registered for GST, subsequent on-sale of associated assets or property are subject to GST; this will continue. Likewise, as far as we know, there is no intention for non-GST registered service providers to have to return GST on sale of their assets.
Please get in touch with us if you would like to learn more about how these changes may affect your Airbnb or gig economy business.