The rapid increase in internet holiday bookings using sites like Book-a-Bach and Airbnb, offers fast and viable opportunities to make some additional cash.
Renting out your spare room or holiday bach has never been easier.
These websites have significantly changed the accommodation. Much of the pain and time-consuming administration associated with advertising properties, screening potential guests and managing bookings and payments has been removed.
While this has been a huge new innovation in the holiday home industry, there are a few things that some landlords forget.
Residential Tenancies Act
If you’re renting out your own home, you will not be covered under the 1986 Residential Tenancies Act. This means that standard rental agreements won’t apply to you.
You’ll therefore need to create your own agreement outlining all your terms and conditions. Your terms will need to cover your payment terms, how many guests you’ll allow, whether you’ll permit smoking or pets, and much more.
Most probably, your rental income will be taxable, although you’ll be able to offset any expenses you incur.
Expenses such as insurance, cleaning, utility bills, accounting, advertising and Book-a-Bach and Airbnb will be deductible.
Mixed-Use Holiday Accommodation
Renting out your holiday home may cost more than you bargained for.
Inland Revenue introduced new legislation in 2013 to address issues with mixed-use holiday accommodation. Typically, mixed-use holiday accommodation include those that are available for private use as well as income generating activities.
The mixed-use home rules apply to properties owned by individuals as well as companies and other entities.
If you earn less than $4,000 a year from these rentals you can choose to keep your home out of the tax system and do not need to return the income – but you also won’t be able to claim any expenses on your rental home.
Before renting out your own property out for short-term accommodation, check your insurance carefully.
Some policies won’t cover damage or losses incurred while your property is being rented out. You also won’t be covered by loss of income if you can’t rent the property out. You might also want to consider public liability insurance.
It’s also essential that you check all relevant health and safety regulations. Make sure you comply with everything before renting your property out. You’ll need things like smoke detectors, safety equipment, appropriate pool fencing, and more.
GST on Mixed-Use Holiday Accommodation
You might like the idea of earning a bit of extra cash from a property when you’re not using it – but you need to be aware that providing such short-term accommodation is a taxable activity.
If you earn more than $60,000 per financial year from your property, you’ll need to consider for GST.
With the growth in popularity of sites like Book-a-Bach and Airbnb more people are choosing to rent out their property on a short-term basis. However, this creates a number of tax implications that you will need to follow carefully.
This is often complex and will generally require assistant from your Chartered Accountant or qualified tax professional.