Airbnb prices go up 15% with GST change
The vast majority of Airbnb hosts appear to have allowed their tax-inclusive prices to rise by a full 15% on Monday after a new law came into effect that requires Airbnb to collect GST on their bookings.
That is even though hosts impacted by the tax regime will get just over half of the GST that Airbnb is now collecting on their behalf back in the form of a rebate.
The way Airbnb owners appear to have responded to the tax change means they can expect 8.5% more cash on any bookings made since Monday than they previously earned.
The law change, which was passed by the former government and allowed to stand by the new coalition Government, requires some large “gig economy” companies including Airbnnb and Uber to levy GST on services booked through their platforms.
Stuff randomly selected 10 Airbnb properties before Monday’s GST rule change to see whether or how they would adjust their prices for a booking in September.
All cost 15% more to book on Monday than they had on Sunday, once GST was applied.
That is despite the fact that under the terms of the new tax law, Airbnb must hand back 8.5 cents of every 15c it collects in GST on bookings with non-GST-registered hosts back to those hosts.
The rebate is designed to compensate those hosts for the fact they can’t deduct the GST they pay on their costs, in the same way that GST-registered businesses can, but is additional income over and above any income they would previously have received.
A four-night booking for a harbour-view apartment in Auckland that cost $960 to book on Sunday now costs $1104 with the $144 GST added, for example, even though only $62.40 of GST would be paid to Inland Revenue and $81.60 passed back to the host.
Had those hosts reduced their listing and cleaning fees by 8.5% on Monday, they would have remained in the same financial position while customers booking Airbnbs would only have seen a 6.5% price rise.
Deloitte tax partner Robyn Walker believed there was some confusion among hosts about the rule change and that most had probably not got their heads around the 8.5c rebate.
“A lot of people don't fully appreciate that there is this credit back.”
Over time, it was likely that the “normal rules of supply and demand” would apply and that some price rises would be partially competed away as hosts saw what the market would take, she said.
“You would expect that once people understand how the credit works, then that will filter through.”
Fellow Deloitte tax partner Allan Bullot said some Airbnb hosts were mistakenly assuming that the new tax regime meant that even hosts who were not registered for GST might have to pay GST on any capital gain when they sold their properties. But if they were under the $60,000 annual revenue threshold above which businesses must register for GST, then that would not be the case – even though Airbnb was now collecting GST on their earnings, he said.
“To be fair to people, it's a reasonable assumption to make,” Bullot said. “They may have heard that if you've got your property in the GST net, when you sell your property, you have to pay GST.
“Yes, the platform is charging GST. Does that mean I have to pay GST when I sell my house? The answer is no – provided they stay under that threshold level.”
The situation for Airbnb hosts who were registered for GST was complicated, he said.