What to consider before hosting on AirBnB for individuals and trustees

Airbnb and other similar peer-to peer accommodation platforms are a great way to earn income by renting out your whole property or an unoccupied space in your home. However, listing a property comes with several responsibilities which the owners, being individuals or trustees, must watch out for.

Income Tax

Airbnb rental income is taxable income.

The costs associated with providing the accommodation, such as insurances, cleaning costs and interest on mortgages, are deductible. If the property is used as an Airbnb rental only, the costs directly associated with the income earned are fully deductible. If the property is used as both a family home and Airbnb accommodation, the Mixed Use Asset (MUA) formula will apply to apportion the costs. MUA rules apply to properties owned by individuals as well as trustees.

GST

GST registration is required when the gross rental income exceeds $60,000.00. Registering your property for GST means that it could be subject to GST if sold.

Rates & Consents

Auckland Council imposed accommodation provider targeted rates which apply to properties that are rented out online on a short-term basis for more than 28 days a year.

Additionally, you may need to obtain resource consent if you rent out your property on a short-term basis for over 90 days a year.

Body Corporates

If the property is in a unit title, ensure you review your body corporate rules as some don’t allow units to be let out on a short-term basis. You may also encounter problems with the body corporate if your guests are a nuisance for the neighbours.

Your Bank

Banks view short-term accommodation differently to long term rentals. Income received from Airbnb may not be treated as revenue unless you can demonstrate satisfactory activity for a prolonged period.

Insurances

Standard house and contents insurance does not normally cover Airbnb rentals. Make sure you understand your policy and any loopholes that can be used by insurers to avoid claim pay-outs.

Additionally, any home used solely for Airbnb purposes will not be covered by EQC as a residential dwelling.

You should also check which costs are covered under Airbnb’s host guarantees.

Safety

Homeowners who rent out their properties, including on Airbnb, fall under the definition of a “person conducting business or an undertaking”, meaning they have to comply with the Health and Safety at Work Act 2015. Homeowners who do not comply may be prosecuted if their negligence results in an injury or death of a guest. Although Airbnb provides cover for up to one million dollars for claims against the hosts, court-ordered fines are illegal to insure against.

If you are considering listing a property on Airbnb or other similar platforms, we urge you to consider the points raised in this article. If you own such a property as a trustee of a trust, you will face the same issues and are not able to defend yourself by saying “It’s not me personally, it’s the trust”. Have a good talk with your lawyer, accountant and insurer in order to avoid major problems in the future.

By Christina Spivak