Tax and GST implications of Air BNB Accommodation

20.03.2017

Many people are registering on Air BNB and are earning additional income from letting out spare space in their homes, but we doubt that when Brian Chesky and Joe Gebbia came up with the idea that they gave any thought to potential global tax consequences.

If you are receiving income by renting out your home, a room or holiday home, it will be subject to income tax and possibly GST.

Rental income of any sort is taxable under the Income Tax Act and deductions relating to that income are allowed.  The deductions are sometimes limited under the apportionment rules or Mixed Use Asset Rules.

Air BNB has taken off worldwide and can be a good additional income earner, but bear in mind that this income is subject to income tax and we recommend that you keep records of all your income and expenditure to provide to your accountant at the end of the year.

The expenses you can claim when renting out your holiday home on Air BNB will be subject to the Mixed Use Assets rules with which most of you will be familiar but if not please get in touch with us to clarify them for you.

The expenses you can claim when renting out a room in your private home or the entire home itself, will be subject to the apportionment rules.

Most people are unaware that the income received from short term rental income qualifies as a commercial undertaking and is considered a taxable activity under the GST legislation. (In most cases a B&B operation is considered a commercial dwelling).

The threshold for GST registration is $60,000 per annum before any deductions of commission or other expenses.  In the case of a Trust or Company ownership, this also includes income “derived” from private use at market value.

This means that not only will the income be subject to GST but your home will be caught in the GST net and the property can be subject to GST when sold or when the B&B operation ceases.   GST will be calculated on a portion of the sale price or market value but the input adjustment is limited to a portion of the original cost of the house.

When deciding to use your home as a B&B, we recommend that you contact us to discuss the Income tax, GST and ownership implications.