Airbnb to apply 15% GST, Uber fare rise ‘will be modest’

Kiwis have only five more days to book Airbnb stays and Uber rides without having to pay GST.

Travellers could beat the GST change by booking Airbnb accommodation for trips they intend to make later this year before Monday, but Airbnb wouldn’t disclose whether it was seeing any last-minute rush.

The majority of Airbnb hosts don’t currently levy GST on their properties as their income from letting accommodation falls under the $60,000 annual revenue threshold below which they themselves don’t need to register for GST.

Uber is in the same position as the vast majority of its drivers also fall under the $60,000 threshold. But a law takes effect on April 1 that requires both companies and a smattering of other, smaller “gig economy” companies to levy GST on all services booked through their platforms.

Because of the finer details of the scheme, prices for the majority of Airbnb stays and Uber rides would need to rise by 6.5% to avoid the chance that either the businesses or their hosts or drivers would end up out of pocket from the tax change.

A spokesperson for Uber said there would be “a modest increase” in all its fares from Monday.

“In navigating the intricacies of the new law, we’ve been focused on ensuring the earnings experience for Uber drivers is not negatively impacted,” it said in a statement.

Airbnb appeared to warn the Government in December that it would not be able to meet the April deadline for charging GST, describing it as “unworkable”.

However, the United States-based online-accommodation booking giant has since told its New Zealand hosts that it will be collecting GST from Monday, in keeping with the new law.

A spokesperson said it would be adding GST to the prices hosts stipulated for their properties and their cleaning fees.

That means the total prices paid by customers for Airbnb accommodation will go up by about 15% unless hosts adjust their prices, its spokesperson confirmed.

The GST rule requires Airbnb and Uber pass back 8.5 cents of each 15c they collect in GST to their hosts and drivers, unless they are GST-registered. The cashback is designed to compensate those hosts and drivers for the fact they can’t deduct the GST they pay on their costs, in the same way that GST-registered businesses can.

The upshot is that the majority of Airbnb hosts will get 8.5% more income for stays from Monday when 15% GST is applied, unless they reduce their prices to reflect the cashback.

Higher-priced and more frequently-booked Airbnbs are less likely to go up in price, assuming GST-registered hosts adjust their prices to reflect the fact that Airbnb will in future be remitting GST on their behalf.

Airbnb’s advice to hosts makes clear that bookings made before Monday for stays that occur after then won’t attract the tax.

That eliminates the risk that hosts might get a nasty GST surprise in respect of bookings they have already taken.

It wouldn’t comment on whether or how hosts were adjusting prices to respond to the tax, or whether it had seen any surge in bookings from travellers locking in GST-free prices ahead of the Monday tax change.