Kiwis renting out homes with Airbnb warned tax obligations

Wednesday, 12 August 2015

Kiwis opening up their homes to making extra cash from rental website Airbnb, for an average $7000 a year, are being reminded they must pay tax.

Airbnb is a crowdsourced accommodation platform that allows people to put up their places, spaces and spare rooms for other users to stay in.

In June the global company set up its first New Zealand office in Auckland to keep up with demand for the service. 

There are now more than 7000 properties in New Zealand listed on Airbnb, up from 6000 just a month ago. 

A growing number of travellers are taking advantage of a surge in the number of homeowners offering to rent out a place to sleep.

The company expects New Zealanders will book almost half a million nights on Airbnb in 2015.

This new wave of hospitality is sweeping the travel industry and sparked concern among accommodation businesses about regulation and health and safety.

This week Parisian hoteliers vented their anger at Airbnb as it moved into a luxury niche market in the city. They are demanding the French government clamp down on sites like such as Airbnb and claim it's unfair competition.

Also in Europe this week, thousands of Irish Airbnb users were told they could be hit with retrospective tax bills after an email from airbnb. It warned them about the legal obligation to provide information to the revenue department.

Airbnb said it would supply the Irish revenue department with names of affected users and addresses of properties.

Airbnb New Zealand general manager Sam McDonagh, who also oversees Australia, said the company proactively advises hosts to declare any income collected as a result of listing their property on the platform.

The average Airbnb host in New Zealand earns $7000 a year through renting out their home or private room occasionally, he said.

'This is pretty modest, but we know it makes a real difference to everyday people and helps to pay down the mortgage, buy groceries and afford those utility bills.'

Despite the rapid growth of Airbnb listings in New Zealand and around the world in recent years, the traditional accommodation industry is continuing to thrive, he said.

'Given the overall growth of the industry and the fact that 74 percent of Airbnb listings are located outside of traditional hotel districts, our guests are staying in neighbourhoods that wouldn't otherwise benefit from the tourist dollar, distributing the economic impacts of travel to communities, cafe's and businesses right across the country,' McDonagh said.

An Inland Revenue Department (IRD) spokesperson said its priority was to maximise the amount of revenue collected and improve voluntary compliance across New Zealand.

Most people voluntarily comply with their tax and social policy obligations, and IRD supported people to meet their obligations by providing information, reminders, self-assessment tools and online services.

'If a person is letting rooms in their home to tourists (via websites such as Airbnb, Bookabach, etc) they are effectively acting as a landlord and will need to pay tax on that income accordingly. This will, however, depend on the arrangements entered into,' he said.

If people were unsure of their obligations they should consider getting professional advice and seek information on the IRD website and  booklet on the subject of rental income and tax.

'It is important people are aware of their tax obligations and ensure that they pay their fair share tax, which funds essential services we all use such as roads, schools and hospitals,' he said.

Motel Association of New Zealand chief executive Michael Baines said commercial accommodators were not against the competition but were concerned the 'product' being offered by sites like Airbnb.

Motels and hotels were built to mandated standards and safety rules, whereas people letting out residential properties did not have to adhere to the same rigorous rules.

Commercial accommodation also had associated usage costs and higher rates than residential renters, which added to the price competition.

The safety issue were raised with councils throughout the country with little response, he said.

'Why are people allowed to stay in what could be unsafe accommodation? Local authorities need to address this as they are exposing ratepayers to potential liabilities.'

He believed the Government had not acted because home-stay trend had moved too fast.

Tourism Industry Association Hotels regional chairman Steve Martin said hoteliers believed there was a market segment for accommodation such as Airbnb, which was serving a need and was in the industry to stay.

However people would get what they paid for, which would not include an array of services offered by commercial accommodation.

Currently there was no real concern among Wellington hotel owners about competition. However Airbnb was a developing service and they were keeping an eye on it, he said.