Tax Updates: 7 April 2025

Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion on any national or international tax issues, please contact Richard via email at richard@gilshep.co.nz.

Updated QWBAs on short-stay accommodation

You may recall that back in 2019, Inland Revenue (IR) issued a number of Questions We’ve Been Asked (QWBA), which explained the income tax implications of providing short-stay accommodation. Since the release of those publications, however, changes have occurred in the areas of:

• the GST online marketplace rules (income tax implications)
• the residential rental ring-fencing rules
• the interest limitation rules
• a change of view in relation to the depreciation for mixed-used chattels, and
• changes to the thresholds for depreciation and provisional tax.

Consequently, IR has now released five updated QWBAs, under the following titles:

• QB 25/01: Income tax – which rules apply if I rent out my home, part of my home, or a separate dwelling on my property as short-stay accommodation?

• QB 25/02: Income tax – which rules apply if I have a dwelling I sometimes rent out as short stay accommodation and also sometimes use privately?

• QB 25/03: Income tax – how do the mixed-use asset rules apply if I provide short-stay accommodation?

• QB 25/04: Income tax – how do the standard tax rules apply if I provide short-stay accommodation?

• QB 25/05: Income tax – if property held in trust is rented out for short-stay accommodation, who declares the income and what deductions can be claimed?

The newly released QWBAs range in length from eight to twenty-seven pages, but naturally some of the commentary applies equally to all scenarios, and therefore, some of the reads may not take you as long as you think.
Some quick takeaways from the QWBAs:

• Short-stay accommodation means accommodation provided for up to four consecutive weeks in a dwelling that is not the guest’s ordinary residence. It does not include accommodation provided to residential tenants, boarders or care home residents, and it does not include student or emergency accommodation. So, if your scenario is not one of short-stay accommodation, then these QWBA’s should not be relied upon for determining a tax position.

• In mixed-use scenarios, you will always have some expenses that are 100% deductible (solely related to the income derivation purpose) or 100% non-deductible (solely related to private purposes). It is, however, those expenses that have a mixed component that these QWBAs will assist you with determining the appropriate deductible amount.

• The mixed-used asset rules are likely to apply if the asset is unused for more than 62 days in an income year. If the mixed-used asset rules do not apply, then the standard tax rules apply. The primary difference between the two sets of rules is that deductions with respect to the former are based on the actual use of the asset. Whereas deductions for the latter, are based on the actual use of the asset plus nights when the asset was available for use.

• If the standard tax rules apply, and you are only charging associates or your mates a less-than-market rental, then IR’s expectation is that your expense claims for those nights will be limited to that income.

• Remember that most of these rules apply on an income year basis – so you need to check each income year, which rules should be applied to determine the deductibility of the expenses.

• All of the QWBAs refer to the new GST online marketplace rules. In this regard, if the accommodation provider is not GST registered, then the online marketplace will pay them a flat-rate credit of 8.5% of the value of the supply of short-stay accommodation. The accommodation provider then can either treat the flat-rate credit as excluded income or as assessable income. If they elect the former, then all expenses related to the online marketplace accommodation should be claimed on a GST-exclusive basis. If electing the latter, it means that expense claims should be on a GST-inclusive basis. Now, if you have some expenses that did not relate to the online marketplace accommodation services, then regardless of the election, a non-GST registered person would claim these on a GST-inclusive basis. Confused?

Happy reading!

This article was originally published through the ‘A Week In Review’ newsletter. If you would like to receive Richard’s tax updates every Monday morning, you can subscribe here.