Up until 31 March 2024, those people that used Uber and Air BnB platforms had an obligation to comply with the Goods and Services Act. Despite this, many people didn’t pay GST on the income earned from the likes of their driving activities or from letting out their properties. Non-compliance occurred for a variety of reasons such as individuals not being aware of their obligations or not wanting to comply.
Either way, the Government ended up out of pocket. To remedy this situation, on 1 April 2024, the legislature introduced onto New Zealand’s statute books the “App Tax”.
Under this legislation, the obligation to deduct and pay GST now falls on the platform owner such as Uber and Air BnB rather than the individual drivers or accommodation owners. This obligation applies irrespective of whether you are registered for GST or not. To demonstrate how the App Tax works, we’ve provided the example below
EXAMPLE
Let’s assume you register and rent out your property using the Air BnB platform. Let’s further suppose you charge $250 per night, and you rent the home for 4 consecutive nights, earning $1000 in rental income.
Air BnB will charge the tenant $1000 plus a charge for GST. This means Air BnB will collect $1150 in total from the person renting your property.
When remitting funds to you, Air BnB will pay you $1085. This is the amount of $1000 total rental income, plus $85. Air BnB will remit the balance, being $65, to the IRD on your behalf, thereby satisfying your GST obligation.
IS THAT MATH CORRECT?
If you’re following the math in this example, you might ask why does the IRD only receive $65 when $150 has been collected in GST? The answer lies in the assumption that’s been made by the IRD.
To revisit our example, it’s assumed the person renting the property is not GST registered because the income they earn from the rental activity falls below the mandatory GST registration level of $60,000 per annum. The legislation surmises, however, that if you were GST registered you could claim the GST on expenses against your income, which would have the effect of reducing the amount of GST payable. The portion you would be able to reduce your GST obligation is deemed to be 6.5% of the 15% GST collected. Therefore, in our example, $65 (6.5/15 * $150) is due to the IRD, and $85 (6.5/15 * $150) is paid to you as the theoretical GST on the expenses you are able to claim.
DIFFICULTIES AHEAD
Where things get complicated is when the person/entity undertaking the activity is GST registered or when the activity pushes them into the GST compulsory registration net eg: they breach the $60,000 annual income threshold. The answer to this knotty issue is to contact your Lion Advisor who will help you navigate your GST obligations.
At Greenlion our days are filled with determining facts and figures and a lot of that work falls around specific dates. To help you plan for your 2026/2027 year, we’ve noted important dates below. Remember to keep these key dates in mind when setting your business goals and budgets and planning your cash flows. START […]
Many successful business owners reach a point in their lives where they ask themselves, what’s next? Accompanying that burning question is what should I do with my business? The answer may lie in selling the business. To maximize the chances of a successful transfer to new hands, much work needs to be undertaken in advance […]
In a bid to drive economic productivity and growth, the National Government has introduced the investment boost initiative. At a micro level, this tax incentive provides businesses with additional funds in the form of tax savings, hopefully resulting in companies becoming more competitive. Under this new scheme, from 22 May 2025, businesses are able to claim 20% […]
As a business owner, do you ever feel you are on a hamster wheel, constantly running, but failing to make progress? Sometimes this is caused by working in your business as opposed to on your business. You might think this is semantics, but experience has shown that those that appreciate the difference are more likely to […]
You’d be living under a rock if you didn’t know interest rates have been steadily declining. This is due in part to the official cash rate (OCR) decreasing over the last 11 months. Depending on what camp you sit in you'll either be pleased or disappointed with the lower rates. Borrowers who've recently borrowed will […]
SELLING YOUR BUSINESS FOR WHAT ITS TRULY WORTH. In every successful business owner’s life, the day dawns when they want or need to transition out of their business. Maybe they’d like to work less and hand over their business to someone else. Maybe they want to sell and sit back enjoying their retirement. Whatever the […]
It's widely recognised Xero is a top choice among accounting software for businesses. It’s also no secret that errors in Xero are easy to make and can prove costly. What often surprises users is the magnitude of these costs. Typically, such errors remain undetected until year-end, when your friendly Lion Accountant is trying to prepare […]
In each edition of Our Roar, we intend to showcase products and services of some of our clients, that we think others will be interested in learning about. One such business is our client Loyal Pooch. This company has designed a stylish storage solution that is suitable for all homes. We've been privileged to help […]
Every year, hundreds of residential property investors claim expenses for the costs of fixing up and upkeeping their rental properties. When expenses are incurred, investors fully expect to receive a tax deduction for the money they’ve spent but not all expenses are deductible. Whether an expense is claimable depends upon the nature and extent of […]
With the end of the financial year finally here, it’s crucial to organise your financial records correctly before forwarding your information to us. The benefits to doing this early are numerous. First, your tax position will be established early in the financial year, providing you with the much-needed time to plan your business affairs. Secondly, on the basis […]
If you’ve just read the article about the construction sector being scrutinised, you’ll know being audited by the IRD is a real possibility. Anyone can be selected for an audit by the Commissioner. Audits are time consuming and expensive too. A way to manage this risk and associated cost is through Audit Shield Insurance. You […]
In our work we have the privilege of meeting some really interesting clients. Recently, we provided advice and accounting services to Warren and Jennifer Kavanagh and their brainchild, Cedar Works. In the process of our engagement, Warren gave us some of Cedar Works products to try and we were so impressed, we thought we’d share […]