Tax Implications for Non-GST Short-Term Stay Operators: Key Changes on the Horizon

The Inland Revenue Department (IRD) is consulting on potential changes to the tax treatment of non-GST registered short-term stay operators. This process is open for submissions until 25 October 2025 and could have significant implications for hosts using platforms like Airbnb and Booking.com, or those taking direct bookings. Here’s a comprehensive look at the current laws, the proposed changes, and why these adjustments might simplify tax compliance.

The Current Law: GST Exempt Income and Apportionment of Expenses

Under the current law, when a short-term stay operator who is not GST-registered receives bookings through an online platform, GST is applied by the platform. However, these operators are not required to register for GST unless their taxable supplies exceed $60,000 annually.

• 8.5% GST Exempt Income If GST is charged through the platform but the operator is not GST registered, the operator receives 8.5% of the GST collected as exempt income. This income is non-taxable, meaning it doesn’t count toward the operator’s taxable income.

• GST-Exclusive Expenses When it comes time to file taxes, the operator must claim their expenses excluding GST. For instance, if a cost includes a GST component, the expense deduction must be based on the GST-exclusive portion.

• Apportioning GST for Mixed Income Sources For operators receiving income from online platforms and direct bookings (or bookings through their websites), the GST treatment of expense claims becomes more complex. Expenses must be apportioned between the GST-charged platform bookings and non-GST direct bookings. This requires operators to determine which expenses are attributable to each income source and claim them accordingly.

The Proposed Changes: Simplification of the Tax Process

The IRD’s proposed changes aim to simplify this process, acknowledging the difficulties and confusion many operators face under the current rules. Here’s what the new tax treatment could look like:

• 8.5% Becomes Assessable Income Under the proposed changes, the 8.5% currently treated as GST-exempt income would instead become assessable income, meaning it will be taxable as part of the operator’s overall income.

• Claiming GST-Inclusive Expenses Operators will no longer need to claim expenses on a GST-exclusive basis. Instead, they can claim GST-inclusive expenses, simplifying the deduction process and avoiding the need to calculate and separate the GST portion of costs.

• No More Apportionment One of the most beneficial aspects of the proposed change is eliminating the need to apportion expenses based on different income sources. Whether bookings are made via an online platform or directly, operators could claim the same expenses in full, regardless of how the income was generated.

Why the Changes Make Sense: Simplification of a Complex Area of Tax Law

The current system, while functional, is highly complicated for non-GST registered operators. The process of separating platform-based income from direct booking income, and then apportioning expenses accordingly, creates confusion for many operators trying to run their short-term rental business. Here’s why the proposed changes make sense:

• Complexity of Apportioning Expenses For non-GST registered operators, the requirement to apportion expenses between online platform bookings and direct bookings adds an unnecessary layer of complexity to tax compliance. If an operator books through multiple channels, they must carefully track which expenses relate to which income source. This means, for example, that if a property is advertised on both Airbnb and a personal website, the operator must apportion utility bills, cleaning costs, and other expenses accordingly—one portion GST-inclusive and another GST-exclusive.

• Simplified Expense Claims Under the new rules, the need to distinguish between income sources disappears. Operators can claim all their expenses on a GST-inclusive basis, reducing the time and effort spent tracking and apportioning costs. This simplifies bookkeeping and makes the tax process more straightforward.

• Consistency in Income Reporting By treating the 8.5% GST as assessable income, the IRD will bring greater consistency on how to treat earnings from short-term stay operations. This change aligns with the broader aim of simplifying compliance, ensuring operators report all their income without accounting for GST exemptions.

Final Thoughts: Moving Toward a Simpler System

At this stage, the IRD’s proposed changes appear to offer a much-needed simplification of tax obligations for non-GST registered short-term stay operators. The consultation period, open until 25 October 2025, allows operators and other stakeholders to voice their opinions and provide feedback on these changes.

While the current system creates confusion around apportionment and GST treatment, the new rules could pave the way for a more straightforward tax environment for those operating in the short-term accommodation market. Operators will no longer have to deal with the complexities of separating income sources or calculating GST-exclusive expenses, making tax compliance more manageable.

If you are a short-term stay operator, now is the time to engage with the consultation process and understand how these changes might impact your business. Submitting your feedback could help shape the outcome and ensure the new rules work in practice.