Unpacking the App Tax: Navigating New GST Rules for Platform Economies

Let's chat about the whole "app tax" situation that's been buzzing around. 

The National party had us thinking they'd ditch the platform economy GST rules, aka the "app tax," but plot twist: the new coalition government decided to keep it. This means from 1 April 2024, the rules are here to stay, no more legislative tweaks needed.

Until now, companies like Uber and Airbnb played the "we're just the middleman" card, leaving GST responsibilities to the individual drivers and hosts. This loophole meant the government was missing out on some serious cash, partly because some folks either didn't know they had to pay GST or chose to ignore it. Plus, a lot of these individuals weren't hitting the $60,000 mark that would require them to register for GST anyway.

The big change with these new rules is that platforms, not the individual providers, will now handle the GST. This applies to services like ride-sharing, food delivery, and accommodation (except for GST-exempt stuff), as long as they're happening in New Zealand.

Here's the lowdown: there are now two transactions to think about. First, from the individual who supplies the services to the platform, and second, from the platform to the customer from the public. If an individual provider isn't making enough to require GST registration (less than $60,000), they're out of the GST game but get a flat 8.5% credit from the platform to compensate them for the GST they could have claimed. Hit the threshold? Then that first transaction is zero-rated, and they can claim GST on expenses as usual. 

The platform will tack on GST at 15% when it sells to the public.

For the big players turning over more than $500,000, or accommodation providers listing over 2000 nights, there's an exemption to keep doing GST as usual and opt out of the rules altogether.

The Good Stuff: This should clear up a ton of confusion for businesses about GST on ride shares and Airbnb stays. Plus, it levels the playing field, making sure these services are treated just like taxis and hotels when it comes to GST.

The Not-So-Good Stuff: The details can be a bit tricky, especially for Airbnb hosts. This two-step transaction model might mean a hefty GST bill if you're selling a property that's been part of this scheme and doesn't qualify for zero-rating.

A Silver Lining: The same law change also opens up a chance to get some assets out of the GST net, under certain conditions. This could be a game-changer for folks who've got a holiday home they occasionally rent out but mainly use for themselves. Just be careful, as there are strict rules to follow.

This isn't just for the platform economy crowd; it could also apply to farmhouses, home offices, cars, and other assets used both for business and personal reasons. If you've claimed GST on these before 1 April 2023, you might still be able to jump on this opportunity, but make sure to get it done by 31 March 2025.

Got questions or thinking about how this affects you? It might be a good idea to have a chat with your expert at Cross Group - Andy Ding. They can help you navigate these changes and figure out what's best for your situation.