By Julie Inwood

As a result of the Coronavirus pandemic, Airbnb (and similar) markets have experienced an abrupt and significant loss of demand for short-term visitor accommodation. As property owners try to attract guests by cutting rates and extending the duration of stays, many are considering making the change to offering their properties as longterm residential accommodation.

It’s very important to push pause on this and give careful consideration to the GST situation before implementing a change to long-term residential accommodation, as this change can potentially have significant and costly impacts.

The facts from a GST perspective:

  • To be registered for GST a person (or entity such as a Trust) must be carrying on a taxable activity, and a registered person/entity who ceases to carry on all taxable activities must inform IRD within 21 days of the cessation.
  • Short-term visitor accommodation is subject to GST if annual revenue is over $60,000, whereas long-term residential income is not subject to GST.
  • If there is a shift from short-term visitor accommodation to long-term residential accommodation, then GST apportionment rules may be triggered. These rules are complex, but in general terms are dependent on whether you have signed tenants to a lease of 12 months or more.
  • If you have done so and the GST apportionment rules are triggered, then your GST registration will need to be cancelled and you may need to pay GST on the market value of the property with your GST Return.

For consideration:

  • Are you registered for GST (or deemed to be GST registered due to revenue over $60,000)?
  • Are you currently carrying out a taxable activity, and will this taxable activity resume within the next twelve months?
  • Do the GST apportionment rules apply to you?