In our blog last year we explored the possibility of changes to GST regulations for online marketplace operators providing ‘listed services’, such as short-term holiday accommodation and ride-sharing (eg, Airbnb and Uber). Fast forward to 2024 and the proposed changes are coming into effect.
Understanding the changes
From 1 April 2024, online marketplace operators, also known as digital platform operators (eg, Airbnb, Bookabach, Uber, Ola), will be required to collect GST on all ‘listed services’ provided through their platforms. This means that services such as ride-sharing, food delivery, and short-stay accommodation, will now be subject to GST when performed, provided, or received in New Zealand, regardless of whether the provider (host or driver, etc) is GST registered.
This significant shift aims to streamline tax collection and ensure fairness across the board. We look at details of these changes and how will they impact ‘listed services’ providers.
What are ‘listed services’?
‘Listed services’ are services facilitated through an online marketplace:
- short-stay and visitor accommodations
- ride-sharing
- food and beverage delivery.
GST will also extend to closely connected services, eg, cleaning fees charged on top of a holiday rental.
Impact on operators and service providers
If you are a listed service provider, such as an Airbnb host or Uber driver, understanding how these changes affect you is crucial.
If you’re GST-registered, you’ll need to treat the supply of listed services sold through online marketplaces as a zero-rated supply on your GST return. This allows you to continue claiming GST on the costs incurred in making these supplies.
However, if you’re not registered for GST, a new flat-rate credit scheme will come into play. Under this scheme, the online marketplace will collect GST at the standard 15% rate, returning 6.5% to Inland Revenue and passing the remaining 8.5% to you as the service provider. This credit recognises the costs incurred in supplying these services and is yours to keep.
Examples
Let’s break this down with a couple of examples:
You’re a GST-registered Airbnb host: you rent out a property on Airbnb for $100 per night. Airbnb adds 15% GST to the nightly rate and guest is charged $115. In your GST return you will include $100 as sales and income of $100 as a zero-rated supply, resulting in no total GST collected. You can then claim back GST on the purchases and expenses incurred in renting out your property.
You’re a non-GST-registered Airbnb host: you rent out a property on Airbnb for $100 per night with Airbnb adding 15% GST to the nightly rate and the guest is charged $115. As you are not GST registered, $6.50 (6.5% of $100) is returned to Inland Revenue, while $8.50 (8.5% of $100) is passed on to you as a flat-rate credit.
Taxable supply information requirements
You will not be required to provide taxable supply information (an invoice) to Airbnb, or the online marketplace, for supplies of listed services through their platform. Online marketplaces will be required to provide the customer (the recipient of the service) with taxable supply information.
Filing your income tax return
When filing your income tax return, include all income earned and business expenses incurred. However, there are specific guidelines to follow.
Flat-rate credits received should not be included as income in your income tax return. These credits are excluded income for tax purposes.
If you are GST-registered, account for income and expenses on a GST-exclusive basis.
If you are not GST-registered, account for income on a GST exclusive basis. If you have expenses that relate to income made:
- through an online marketplace, deduct expenses on a GST exclusive basis – this is because the flat-rate credits you receive from the marketplace recognises the GST on the costs you incur when making this income.
- outside of an online marketplace, deduct expenses on a GST inclusive basis.
- partly through an online marketplace and partly from non-marketplace based sales, you will only be able to use a GST inclusive basis for expenses relating to the non-marketplace based sales.
Bigger businesses
Larger organisations have the option to opt out of the new regulations through an agreement with the marketplace operator. This allows them to retain control over their GST responsibilities as they have done previously. However, this option is typically not available to individual Airbnb hosts, as the threshold for opting out is set at $500,000 in sales.
Next steps
As these changes come into effect, it’s essential for ‘listed services’ operators to communicate their GST registration status to their online marketplace. If you have any questions or need assistance in navigating these new regulations, don’t hesitate to reach out to us, we’re happy to help.
