Holiday and short-term rentals: What you need to know
If you're thinking about making your home, rental property or holiday house available for short-term rentals, make sure you know the rules on holiday rental agreements, claiming expenses, whether to declare it at tax time, and more.
Key things to consider for holiday rentals
With the rise of online holiday accommodation websites like Airbnb and Bookabach, listing a property for short-term let is easy. But there’s more to it than just putting your property out there. Key things to consider include:
- creating and enforcing a holiday rental agreement
- tax obligations, if any
- insurance cover
- health and safety and consumer laws
- claimable expenses and record-keeping.
Check out your local council rules on short-term accommodation — some councils require you to register properties which are rented out, eg Queenstown Lakes District Council.
Make sure you fully understand the terms and conditions of any hosting website you use.
When a house you own is used as a holiday rental, you’re not covered by the Residential Tenancies Act. This means standard rental agreements don’t apply.
Some hosting sites, like Airbnb, include booking terms and conditions in your page listing. If terms and conditions aren’t included when you list your rental, you’ll need to create and enforce a written agreement outlining your terms and conditions.
The agreement should cover rules and expectations about:
- payments, including deposits and refunds
- maximum number of guests
- camping, eg extra guests can/can’t pitch a tent on the lawn
- liability, eg if someone has an accident on your property.
If you use a template provided by your preferred hosting website, make sure it suits your situation and covers everything you need it to.
Check your preferred hosting site for rental agreement templates and tips on attracting and vetting guests.
If you're a landlord
You can’t ask tenants to move out temporarily so you can make more money over the summer by using the property for Airbnb or similar.
If your tenants decide to sublet the property while they’re away, they need your permission and must abide by their tenancy agreement. They can’t sublet the property without your permission.
Insurance, tax, customer vetting and the Consumer Guarantees Act are all things to consider when letting to holiday-makers.
Income you receive for providing accommodation, including through websites like Airbnb or Bookabach, is taxable. This includes any payment for one-off or irregular rentals. Special tax rules apply to calculating income and expenditure from short-term rental accommodation (also known as short-stay accommodation) depending on the type of property and its use.
This means you:
- must include the income on an Individual tax return (IR3). This can be filed online via your myIR account — for most people it’s due 7 July
- can claim expenses for the time you rented out the property/ space, eg rates, insurance, cleaning and advertising – refer to the special tax rules for your property type and use.
- must keep clear records to confirm all income and expenses.
GST rules apply if your income is over $60k in a 12-month period. They also might apply if you offer guests meals, cleaners or other services in addition to accommodation. If you’re not sure, check with Inland Revenue — or your accountant, if you have one.
Special tax rules
Inland Revenue has a number of publications on short-stay accommodation to help you work out which rules apply depending on the type of property and use, eg, the “standard rules” or “mixed use asset rules” (discussed below). You can start with Inland Revenue’s short-stay accommodation overview, which has a flow chart to work through which rules apply to your type of property and its use.
You can only claim expenses if you declare your rental income in your tax return. The special tax rules may limit the expenses you can claim depending on the type of property the use and how long it is available to rent. These rules provide guidance for working out how to calculate your income, expenses and taxable income that you must include in your income tax return.
- Keep clear records to confirm all income and expenses.
- Expenses you can claim include rates, insurance, cleaning and advertising.
- You can only claim expenses for the time you rented out the space/ property.
- If you're renting out a room, you can only claim a proportion of your household expenses.
Holiday homes you rent out and use yourself
The "mixed use asset rules" apply if you have a mixed-use holiday home where:
- you stay in the holiday home yourself sometimes
- you rent it out to others sometimes
- it's not used for a total of 62 days or more during the tax year — or the same proportion if you buy or sell it partway through a tax year, eg a total of 31 days if you sell six months into a tax year.
If you have a mixed-use holiday home and you earn less than $4,000 a year from renting it out, you don't need to include this income in your annual tax return. If you choose not to declare this rental income, you won't be able to claim expenses for the holiday home either.
Your usual house and contents insurance might not cover you if something happens while your property is rented out. Speak to your insurer — you may need to pay a higher premium or arrange extra cover, but this is better than finding out too late that damage isn’t covered.
Talk to your insurer about cover for:
- theft or damage by short-term holiday tenants
- cover during times the property is empty
- loss of income — if something major happens and you are unable to rent the property out.
As well as cover for the property and contents, consider public liability insurance. This is cover to protect you if a guest gets hurt while staying at your property.
Some hosting websites offer free cover for these types of things, but it’s worth a chat with your insurance company either way.
Health and safety
Check whether there are any regulations you need to comply with — your local council is a good place to start.
- Fit smoke detectors throughout the property and check these are in working order every three months.
- Any deck more than 1m high has a fence of at least 1m high right around it.
- Any pool deeper than 400mm is fenced.
- Hazardous items like chemicals and poisons are properly stored and kept out of sight.
- Any kayaks or boats provided for use are seaworthy and life jackets are provided.