GST for Air BnB property managers can be confusing. So here is a quick overview that hopefully makes it less so.
GST for Air BnB Property Managers
GST is an issue for Air BnB property managers – for two reasons.
Private landlords are usually not registered for GST. So whether you charge GST or not means 10% more or less in their pocket.
A large part of your input is usually GST free but your output is not – assuming a GST registration. So your business turns into a huge GST generator when registered.
Whether you need to register for GST depends on your GST turnover. Your GST turnover is your gross income, so your 15% to 20% commission plus any cleaning you charge in your own name.
But a lot of the cash you collect doesn’t actually count as your GST turnover. Neither the rent or security deposit you collect nor the repairs you on-charge count as your GST turnover since you only act as an agent on your landlord’s behalf.
Whether cleaning is part of your GST turnover depends on how you charge it.
If you act as the agent and engage the cleaner on the landlord’s behalf passing on the cost, then it doesn’t count. But if you engage the cleaner in your own name (probably adding a margin), then it does.
How do you know whether you act in your own name or as an agent on the landlord’s behalf? If
1 – your agency contract says that you will procure the service or goods on the landlord’s behalf, you act as an agent. If it doesn’t, you probably act in your own name.
2 – the invoice is addressed to the landlord, you act as an agent. Addressed to you, you probably act in your own name.
3 – you attach a copy of the invoice or bill to the rental statement, you probably act as an agent. If you don’t, you probably act in your own name.
4 – you on-charge exactly what is invoiced, you probably act as an agent. Charging an additional margin you are probably acting in your own name.
So now that you know your GST turnover, you can tell if you need to register.
You need to register for GST within 21 days when your actual or projected GST turnover exceeds $75,000 per annum.
Your current GST turnover is this month plus the past 11 months. Your projected turnover is this month plus the next 11 months.
Your GST liability is the GST on your sales (commission and possibly cleaning) less any input tax credits.
A large part of your input is usually GST-free. Air BnB is a service and so a large part of your costs is probably wages. And wages are not subject to GST. So your input tax credits are probably relatively low, giving you a reasonably high GST bill to pay.
When renters pay a security deposit, it doesn’t constitute consideration per Div 99 GST Act unless the deposit is forfeited.
However, whether forfeited or not, security deposits don’t affect your GST base anyway since you only act as an agent. It is the landlord who is entitled to the security deposit. And they are not registered for GST. So there is no GST issue either way for anybody involved.
To promote your business you might hand out vouchers to potential landlords. The vouchers might say something like ‘0% Commission on your first rental’ or ‘Free cleaning on your first rental’.
Whether and when a voucher – or a gift or membership card or similar- is subject to GST depends on two things:
# 1 Was it free or did somebody pay for it?
If it was free, ignore it. You basically just offered a discount. But if somebody paid for it – different story and you go to # 2.
# 2 Is the Voucher for a Stated Monetary Value or Specified Item?
A paid-for voucher is not a taxable supply per Div 100 GST Act, if it has a stated monetary value. With a stated monetary value, payment for the voucher just constitutes a prepayment, but not consideration for a taxable supply.
When the voucher is redeemed, the holder receives a supply and the consideration for that supply is the total of the voucher plus any additional consideration paid.
However, if the voucher doesn’t have a stated monetary value, but just entitles to a specified item or service, then the payment for the voucher is consideration for the supply and hence triggers GST at the time of payment.
So that was a short overview of your GST position as an Air BnB property manager. We hope that it will help you in some way. Please write or call if you have any questions.
Disclaimer: Tax Talks does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.
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Last Updated on 13 November 2019