Upcoming GST Changes - App Tax

The landscape of GST is set to change significantly from 1 April 2024, affecting businesses and individuals involved in ride-sharing, food delivery, and short-term accommodation services. Suppliers operating through these platforms will not need to register for GST themselves if they continue to make under $60,000 per year; instead, the platforms will be responsible for charging, collecting, and remitting GST on the services provided.

What You Need to Know:

GST on Digital Platforms:

• Platforms will now be responsible for charging GST on services offered, even for providers earning under the $60,000 threshold.

• This move aims to integrate the gig economy more effectively into the GST framework.

Input Tax Credit Adjustment:

• An 8.5% notional input tax credit will be introduced, applying GST on 6.5% of the service's value. This measure compensates providers who are not GST registered for their operational costs.

• For suppliers already registered for GST, no additional credit will be provided, and they will continue to claim GST input tax credits on their costs

Opting Out Options:

• Large operators, such as hotels and those with over 2,000 nights annually, can opt out of these rules, provided they meet certain criteria. This allows them to continue handling GST on the full value of services rendered.

Impacts on Accommodation Providers:

• Providers not registered for GST will see platforms charge 15% GST on services on or after 1 April 2024 (even if the accommodation provider earns well under the $60,000 per year GST threshold from the accommodation).

• The 15% GST charged by the platform will be split, with 6.5% of the GST being paid to Inland Revenue and the remaining 8.5% of the GST charged being paid to the accommodation provider by the platform as a “flat-rate credit”.

• GST-registered providers must zero-rate supplies to platforms unless opting out.

• The property's GST status remains unaffected.

• Providers already registered for GST will be required to charge GST on the nightly rental (and any other fees charged) on each booking made through their platform on or after 1 April 2024. If this occurs the GST registered accommodation provider must zero-rate their deemed supplies to the platform.

• Many operators who earn over $500,000 are expected to opt out of the platform rules and continue to account for and pay GST themselves.

Transitional Repayment Rule:

• A new rule offers a window until 1 April 2025 for property owners to potentially remove their property from the GST regime under certain conditions, focusing on those primarily used for private purposes.

• This is particularly relevant for property owners who rent out their property for short periods (e.g., a few months each year) but primarily use it for personal purposes.
  

Action Steps:

Providers and platforms must adapt to these changes through system updates and revised processes. It's essential to review your current GST status and consider the implications of these changes on your operations. For large operators and those with specific circumstances, exploring the opt-out provisions may provide a preferable course of action.

If you want more information and assitance on this, please get in touch with our team.