Airbnb warning
Tax man chases owners
Take care if you’re one of the thousands of Kiwis using Airbnb or other online websites to rent out a home — you could be in the crosshairs of Inland Revenue.
The Government agency has set its smart, new data robots loose on the sector in the hunt for tax cheats.
It’s also lobbying hard to get its hands on Airbnb’s company records.
It means you could be in line for a nasty letter or a fine should you have failed to report your rental income.
“Some of the records of activities, such as Airbnb, are held offshore. However we’re working to obtain this data via data-sharing agreements we have with many overseas tax authorities,” an IRD spokeswoman told the Herald on Sunday.
Mike Rudd, tax director for accountancy firm Baker Tilly Staples Rodway, said the IRD publicly clarified the tax rules around short-term rentals in May, meaning there was no longer any excuse not to declare your income.
He expected a crackdown to begin in earnest at the end of the tax year.
“They will be matching up data automatically and spitting out a lot of nasty letters,” he predicted.
It’s a blitz triggered by the big money at stake.
A Victoria University and IRD study estimated in April that undeclared income from the so-called hidden economy was resulting in New Zealand missing out on about $800 million in annual tax.
Chartered Accountants Australia and New Zealand put the figure in excess of $1 billion per year.
Builders, plumbers and hotel and restaurant owners accepting cash payments and not declaring their income were among those initially in the department’s sights.
But bitcoin users, Uber drivers and Airbnb and other short-term rental hosts were now on notice as well.
Short-term rentals owners could get themselves into trouble by failing to declare the income they make from guests.
Those owning two or three shortterm rentals on Airbnb or other platforms also ran the risk of racking up big tax debts under the goods and services tax.
This was due to short-term rentals tending to bring in higher gross returns than normal rentals and so being more likely to earn above the $60,000 threshold at which GST must be paid.
Rudd said he had seen a number of people shocked to discover they were meant to have paid GST on their rental income as well as on the sale of homes used as Airbnb rentals.
Terry Baucher, founder of tax advisers Baucher Consulting, warned those who hadn’t declared their income that they were better off coming forward voluntarily.
If IRD found undeclared tax, it would usually search back through five years of income at a minimum.
If there had been deliberate tax avoidance, it could do an audit through a person’s entire tax history and may even prosecute for tax evasion.
Baucher said IRD had new datamatching capabilities, having recently
spent $1.9 billion — mostly on computer technology — in a major upgrade.
The upgrade was working too, with IRD’s latest annual report stating every $1 dollar spent hunting undeclared tax was now returning $5.65 to the tax coffers.
Offshore earnings aren’t outside the department’s scope, with IRD receiving info on 700,000 financial
accounts held overseas by New Zealanders in the year to June 2019.
“People underestimate Inland Revenue at their peril,” Baucher said.
The IRD spokeswoman said the department’s first step in securing unpaid tax was to encourage Kiwis to voluntarily declare their income.
However, she acknowledged there was a “temptation” for users of “sharing companies” to under-report their income.
“If that happens and people choose not to report their rental income, Inland Revenue will audit them where we need to,” she said.
Airbnb head of public policy for Australia and New Zealand, Derek Nolan, said the platform partnered with the government to ensure it could do its job, as well as with rental owners to help them meet their tax obligations.
“We support a light-touch, mandatory data-sharing framework that not only takes data privacy laws into account, but makes it easier and cheaper for New Zealanders to pay their taxes across all sharing economy platforms,” he said.