As of 1 April 2024, New Zealand's approach to Goods and Services Tax (GST) takes a turn within the sharing economy and online marketplaces. This shift, aimed at levelling the playing field for all market participants, mandates that both domestic and offshore-based online marketplaces—think Uber, Airbnb, and Booking.com—now play a pivotal role in the GST ecosystem. Here's a detailed breakdown of what these changes entail and how they might affect you.

New Legislation for Online Marketplaces

Under the new rules, online marketplaces are now tasked with collecting and remitting GST for certain services when performed, provided, or received in New Zealand. This includes a variety of services such as:

• Short-stay and visitor accommodation

• Ride-sharing and ride-hailing

• Food and beverage delivery

This broad spectrum of services underscores the government's intent to encompass a wide range of activities within the sharing economy, ensuring that GST collection is comprehensive.

Marketplace Operators as Suppliers

A significant pivot under the new legislation is the treatment of marketplace operators as the suppliers of these services. This designation requires them to collect and return 15% GST on all transactions facilitated through their platforms. It streamlines the process, making these operators directly responsible for GST compliance, thereby simplifying the tax obligations for individual service providers operating through these platforms.

Flat-Rate Credit Scheme

To ease compliance burdens, especially for sellers not registered for GST, the government introduces a flat-rate credit scheme. Here's how it works:

• For GST-registered suppliers: For example, if a holiday home is listed for $230 per night, the platform remits $30 GST to the Inland Revenue Department (IRD), treating the transaction between the platform and the supplier as zero-rated. The supplier, in turn, reports $200 as a zero-rated supply in their GST return.

• For non-GST registered suppliers: The platform is obliged to pay GST to the IRD but benefits from a "flat rate credit" of 8.5%, passed on to the NZ taxpayer. Using the same example, the supplier would receive $217, with the platform returning net GST of $13 to the IRD.

Property Exclusion from GST Net

An essential clarification in the new rules is that while services are subject to GST, the property itself remains outside the GST net. This means properties generating annual income below $60,000 are exempt from charging or returning GST on any future sales, providing relief to smaller operators within the sharing economy.

IRD Oversight on Income

To tighten tax compliance, the IRD will now receive detailed information on all income earned through these platforms. This transparency ensures that individuals and entities correctly report this income in their tax returns, aiming to curb tax evasion and improve fairness in the tax system.

Summary

For GST-registered owners, the financial landscape remains unchanged. However, non-registered individuals stand to gain from the introduction of the flat-rate credit, as it translates into a net increase in revenue—assuming sales or bookings remain constant. This shift not only simplifies the GST process for users of online platforms but also aims to enhance tax compliance across the board.

As we navigate the evolving landscape of GST regulation, it is essential for everyone to stay informed and fully grasp these updates. Should you require further details or need additional clarity on these changes, please do not hesitate to contact us at SRN. We are here to offer our assistance and ensure you have all the information you need.

Alysha Redgrove
CA CPP