In central Christchurch around 200 of the planned 900-home crown-led east frame housing project (comprising a mix of 1, 2 & 3 bed apartments) have been built by Fletcher Building. Meanwhile, other private developers have been prolific in completing a number of other multi-unit residential accommodation both in the central city and on its fringe. Many are being purchased by investors with the intentions of letting them out on short term basis.
So, with the number of providers of Airbnb and other short-stay type accommodation only likely to increase, here are a few things we think owners, prospective investors, and agents should be aware of.
Beware; new regulation is coming
Around NZ local authorities are looking to regulate the short stay accommodation sector. In Christchurch, the Christchurch City Council has been considering options under the District Plan with a view to possibly promoting a plan change. The current rules permit unhosted home share accommodation (HSAs) within the central city, with some restrictions on property size, guest numbers and length of stay. In residential and rural zones outside of the central city unhosted HSAs require a resource consent. Options the CCC are considering are:
No change to the current rules;
Allow whole homes to be listed for a certain number of days per year, potentially 60, 90 or 120 days;
Allow properties to be listed in particular areas, but not others, without a resource consent;
Only allow HSAs that meet certain criteria, to minimise impact on neighbours. Criteria might include; whether a property is part of a multi-unit development, or a rear site; or if there is adequate parking.
Remove restrictions and allow HSAs in residential and rural areas as a form of permitted residential activity.
Given recent publicity and losing a case at the Environment Court the CCC will likely release a plan change for at least residential zones. This will mean people will have the opportunity to submit on the plan change.
Beware; the GST net may apply
In this regard there are two things to consider
Whether the provision of short stay accommodation is a “taxable activity”
Unlike the provision of the traditional residential rental accommodation in a “dwelling”, which is an “exempt supply” under the Goods and Services Tax Act 1985 (), the provision of short stay accommodation is a “taxable activity” if it is being carried on “continuously and regularly”, because the supply of short stay accommodation is not treated as the supply of accommodation in a “dwelling”.
Whether the GST registration threshold is or will be exceeded.
Under the GST Act if the value of the income earned from the short stay accommodation is greater, or is expected to be greater, than $60,000 in a 12 month period, the owner is required to register and account for GST.It is the gross amount paid by guests, rather than the net amount received, that is the relevant factor (so, if an agent, such as Bachcare, is used to manage the short stay accommodation, it is the amount they are paid by the guests, not the amount the owner received, that is the relevant amount).Further, the value of taxable supplies from all taxable activities is combined to determine if the $60,000 threshold is exceeded.
So, if a person owns one or more properties let for short stay accommodation continuously or regularly it is conceivable that a taxable activity is occurring and the GST threshold is exceeded, meaning the person will be required to account for GST on the income received. They would also need to account for GST if the property is sold.
If any of this applies to me, what should I do next?
This article is intended as an alert to unsuspecting owners of, or prospective investors in, short stay accommodation units, and agents who may be dealing with them, of the potential for GST to apply, and for the regulation of them to change.
GST is a complex area of accounting and law. There are a number of factors that may impact on a person’s GST position, and there are different ways of structuring, and restructuring, a person’s affairs to manage GST. Anyone planning to buy a residential unit or units to supply Airbnb or another form of short stay accommodation should be advised to seek advice from an appropriately experienced accountant beforehand. We are happy to make recommendations if requested.
They should also be aware of the changing regulatory environment. Our property and resource management experts are keeping abreast of the changes and are happy to answer any queries.