Thinking about renting out your home to the public over Christmas?
Tax laws require that any income generated is subject to tax and that a taxpayer may also deduct costs incurred in generating that income.
Long term rental – You will be required to disclose the rental income received and be entitled to a claim for property related expenses including a house, a room, a caravan or a sleep-out.
Short term rental – You are also required to disclose the income received and will be entitled to a claim for property related expenses. Providing short term accommodation can also be subject to the New Zealand GST rules.
Mixed-use holiday home – The IRD has provided guidance to calculate the tax obligations for owners of “mixed-use” holiday homes. You have a mixed-use home if, during the year, your property is used for both “private use” and “income-earning” and it’s unoccupied for 62 days or more. Your expenses from mixed-use holiday homes then fall into three categories – Fully deductible; not deductible and apportioned.
There are exemptions available (except for companies), you can keep your property outside the tax system if your income from income-earning use is less that $4,000 for the year therefore you don’t declare any of your income and you can’t claim any of your expenses. You can also choose for your rental activity to remain outside the tax system if you make a loss, and your rent received is less than 2% of the rateable value of the property.
Boarders or home-stay students – You are required to disclose the income if you have five or more. If you have four or less and the income is under the weekly standard cost the Department set each year then you don’t have to declare the income, although you can choose to do so if you wish.
If you are considering renting your property, please contact one of the team to discuss further.