How bed and breakfast owners are hit by app-tax rules
The Government says it hopes to collect $47 million with new platform economy taxes — better known as app taxes — as this country moves to tackle international tax evasion associated with the sharing economy.
While both National and Act had campaigned against the new GST rules, the coalition made what’s been labelled a surprise decision to stick with them, which has “significant” implications for accommodation businesses operating through booking platforms.
The New Zealand Bed & Breakfast Association says many of its members are confused about how to meet the complex new rules.
For the B&B sector, the app tax will affect properties that market through platforms like Airbnb, Booking.com or Expedia.
“In our view, the rules have been made unnecessarily complex for hosted bed and breakfast operators,” association president Ann-Marie Johnson says.
From the beginning of the month, online booking platforms have been required to collect and pay GST on accommodation bookings.
A Hospitality New Zealand paper, with analysis from Deloitte, says the intention is to bring virtually all suppliers of short-stay accommodation within the GST system, even if the underlying supplier would not normally be required to register for GST (because they generate under $60,000 per annum of short-stay accommodation income) and instead make the online platform the party responsible for paying the GST to Inland Revenue.
It is designed to capture offshore businesses currently not collecting or paying GST on each transaction as they claim they simply offer a way to book and are not selling products or services they own. This will include Airbnb, Booking.com and Expedia.
Revenue Minister Simon Watts said the $47m of tax collected is much-needed revenue.
New Zealand is also implementing an OECD information reporting and exchange framework, which is estimated to add an additional $11m a year.
“This framework is designed to help tax administrations globally address income tax evasion associated with the gig and sharing economy.”
Watts said the Government acknowledged platform operators and providers may have to make business changes, but there is support available to help.
Inland Revenue was actively supporting platform operators and others subject to the rules with implementation.
Further changes to the platform economy tax rules will be made to ensure that they work as intended when more than one person, other than the provider of services, is involved in supplying accommodation.
New rules as they stand were confusing, said Johnson. A GST registered B&B could have to manage a mix of approaches, with the online platform bookings being zero-rated for GST and bookings through other channels attracting the standard GST payable.
Some accommodation providers who prefer to keep managing their own GST returns can opt out from the new rule.
But the App Tax regulations allow only large accommodation providers — who turn over more than $500,000 or deliver more than 2000 room nights in a year — to unilaterally opt out without needing the platform’s consent, she said
Most B&Bs are small businesses that operate only three to five guest rooms and many close over winter. “So while they earn enough to meet the $60,000 threshold for GST registration, they are nowhere near the level of turnover required to meet the opt-out requirements. In our view, all GST-registered businesses should be permitted to opt out,” Johnson said.
Adding to the confusion, each booking platform is taking a different approach to the App Tax. Johnson said Expedia has said they will delist small operators who do not meet the opt-out criteria. It appears that some platforms will have added 15 per cent to all bookings from April 1 to cover the GST requirement, while other platforms may deduct the GST from the current tariffs.
“For many B&B operators, the majority of their bookings come direct via the international travel trade. The booking platforms provide a small proportion of room nights but having to manage two or more different approaches to GST will be enormously complex and timeconsuming.”
The association advises members to seek advice from their accountants.
Johnson said the new App Tax was a first step towards creating a level playing field with short-term rental accommodation (Stra) providers, by ensuring they pay GST. But more regulation was required to make Stra providers meet quality and safety standards, as commercial accommodation providers do. “Unlike (Stra) providers, B&B owners host visitors in their homes, often sharing their personal spaces with their guests as they host them around the breakfast table. We offer a genuine, Kiwi hospitality experience that is often the only opportunity for international guests to chat to a local,” Johnson said.
The hosted B&B sector attracts the high-value visitors the country seeks — travellers who are willing to pay premium prices to interact with their hosts and learn more about our culture and way of life. They tend to travel slowly and get off the beaten track, staying in high-end homes in some of our most beautiful locations.