When you get money from renting out a room or rooms in your home you’ll earn rental income. You may need to pay tax on your rental income. How you’re renting it out, who you’re renting to, and for how long, changes what income tax you pay.
Here we will discuss:
Renting out to flatmates
Renting out to private boarders or home-stay students
Short-term renting out of rooms in your home
Renting out to flatmates
Flatmates share a house, expenses and chores. Usually one flatmate is the tenancy holder.
If you, or someone in your flat, collects rent from the others to pass on to your landlord, the income is not taxable. There’s no need to do anything. If you own a home and get flatmates in, you may have tax to pay on the profit from renting to them. Use the actual cost method to see what tax you may have to pay.
Renting out to private boarders or home-stay students
Private boarders and home-stay students are different to flatmates. When boarders rent rooms in your house, part of the rent they pay is for services. These are services like meals or laundry. To see if there’s tax to pay use Standard cost method for boarders and home-stay students.
Short-term renting out of rooms in your home
Renting short-term is when you rent out a room or rooms in your home for a few nights or up to 4 consecutive weeks at a time. This excludes renting out to flatmates or boarders. It's usually the type of renting you'll offer through services like Airbnb or Bookabach.
When you’re renting out rooms in your home short-term, you may be able to work out your rental income using either the:
short-stay standard-cost method
actual cost method.
GST and renting out short-term
Renting out short-term is a taxable activity for GST.
If you’re not already registered for GST, you need to:
add your short-term rental income to income from your other taxable activities
register for GST if your total turnover is over $60,000 in a 12 month period.
If you’re renting out short-term and you're registered for GST you:
pay GST on your short-term rental income
claim GST on your allowable rental expenses.
#Source: IRD
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