How to work through the Airbnb GST changes (it’s easy)
The “App tax” has been getting a lot of media attention recently. Briefly, it’s a tax the government has brought in as of 1 April 2024, to fill in a gap in the GST system.
GST is designed to be a consumer tax, rather than a business tax.
Prior to the law coming into effect, it was the “Apps” that were incurring this tax bill, rather than the consumers of the service; the Airbnb guest, or the passenger in the Uber.
Airbnb falls under the ‘App’ banner and as such, all Airbnb hosts are now required to pay GST to Inland Revenue.
Fortunately, it’s not scary and will not result in a heap of paperwork for you to do.
Here’s how it works:
Airbnb will now charge GST on your bookings and pay this over to Inland Revenue themselves
The GST is calculated on your room rate and cleaning fee. So if your rate is $300/night and cleaning fee of $50, GST at 15% is calculated on the total of $350, which is $52.50.
BUT it’s actually not that bad either. IRD will give you a flat rate credit BACK of 8.5%, automatically. So, the actual GST cost is reduced to 6.5%. This reduces the GST from $52.50 to $22.75, a huge reduction.
This is to reflect the GST that you pay on your expenses; cleaning supplies, linen, stocking the pantry and fridge etc etc.
You can find how much GST has been deducted (and credited back) from your income in your Airbnb account by going to Menu > Earnings > Payout Settings > Transaction History.
Importantly, unless your Airbnb is earning more than $60,000 in GROSS booking fees, you DO NOT need to register for GST. GST is automatically handled by Airbnb.
If you ARE earning more than $60,000, then you DO need to register for GST.
If you’re ALREADY registered for GST, then you need to cease including your Airbnb earnings and expenses in your GST returns as this is now being double counted.
At the end of the day, it’s a pretty straightforward system. Just remember, you don’t need to register for GST if earning under $60,000 from your Airbnb, BUT you must remember to remit this income in your annual income tax return.
I’ve written a downloadable guide on how to handle the accounting for your Airbnb here, which includes the above and also explains how the income tax on your Airbnb works as well – it’s not as straightforward as GST.
If you found value in this article, it would mean a great deal to me if you followed me on Instagram or Facebook. Heck, you could even send me an email!
Take care.