When managing rental properties, understanding the tax implications, particularly GST (Goods and Services Tax), is crucial for property owners. Whether you can claim GST on rental property expenses depends on the type of rental activity and the nature of the property.
1. Residential Rental Properties
For residential rental properties, GST does not apply to the rental income. Renting out residential property is considered an exempt supply under New Zealand tax law. As a result:
- Property owners cannot charge GST on the rent they collect.
- GST on expenses related to the residential rental property cannot be claimed.
However, these expenses can still be deducted for income tax purposes, with the GST component included in the expense deduction rather than being claimed separately.
2. Short-Term Accommodation
The GST treatment changes for short-term accommodation, such as properties listed on platforms like Airbnb. Key points include:
- If the total turnover from all taxable activities, including short-term rentals, exceeds $60,000 per year, the property owner must register for GST.
- Income from short-term rentals is subject to GST.
- Property owners can claim GST on expenses related to the rental activity, including maintenance, cleaning, advertising, and other operational expenses (Inland Revenue NZ).
3. Mixed-Use Properties
For properties used for both private purposes and as short-term rentals, GST on expenses can be claimed proportionally, based on the proportion of income-earning use.
- For example, if the property is rented out only part of the year or certain rooms are rented, the GST claimable on expenses must reflect this mixed-use.
- Property owners must maintain detailed records to substantiate the proportion of the expenses that are claimable.
4. Commercial Rental Properties
For commercial rental properties, GST rules differ from residential properties:
- Commercial rentals are subject to GST, meaning property owners can charge GST on the rent collected.
- Property owners can claim GST on expenses incurred in managing the property.
- Any sale of a commercial property will be subject to GST on the sale price (Inland Revenue NZ).
Key Points to Consider
- Residential Rentals: No GST on rental income or expenses.
- Short-Term Rentals: GST applies if annual turnover from all taxable activities exceeds $60,000. GST can be claimed on related expenses.
- Mixed-Use Properties: GST claims must reflect the proportion of rental use.
- Commercial Rentals: GST applies to rental income and expenses.
Understanding these distinctions is essential for optimising tax obligations and ensuring compliance with tax regulations. For personalised advice, consulting a tax professional or accountant is recommended, as they can provide guidance tailored to your specific circumstances and ensure that all tax filings are accurate and compliant.