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Using Xero Accounting for Airbnb Property Management

Prosaic Team10 min read

Starting April 1, 2024, New Zealand's short-term rental sector faces significant GST modifications. This guide clarifies requirements for both registered and unregistered property owners managing platforms like Airbnb and Bachcare — and explains how to use Xero to stay on top of your obligations.

The basics: the new "app tax" GST changes

A 15% GST now applies to all short-term rentals booked through online platforms, collected from guests by the platform (Airbnb, Bachcare, etc.) on behalf of Inland Revenue.

For non-GST registered owners

The new rules affect non-registered hosts as follows:

  • Guest pricing increases by the GST amount (e.g. a $200/night listing becomes $230 to guests), and you retain the original $200
  • You receive a flat-rate credit of 8.5% on rental fees (approximately $17 on a $200 fee), treated as non-taxable income
  • You must now deduct only GST-exclusive expenses from rental income

For GST-registered owners

You must:

  • Report your GST number to rental platforms
  • Classify platform income as zero-rated supplies in GST returns
  • Continue claiming GST on relevant business expenses
  • Note: you are not eligible for the flat-rate credit

Should you register for GST?

Advantages of registering:

  • Reclaim GST on business-related expenses
  • Better cash flow and operational efficiency

Disadvantages of registering:

  • Property sales trigger GST obligations, significantly reducing net sale proceeds
  • Requires more rigorous bookkeeping and complex compliance

Get professional advice before registering — particularly if you might sell the property in the future.

Tracking Airbnb and Bachcare properties in Xero

Xero offers significant advantages for managing short-stay rental finances:

Multiple property management — Use tracking codes to maintain separate financial oversight for each listing or property.

Platform annual reports — Airbnb and Bachcare provide end-of-year summaries detailing fees, commissions, and GST credits. Import these into Xero for accurate records.

GST-exclusive tracking — Ensure all expenses are logged at their GST-exclusive amounts to maximise deductible amounts while maintaining compliance.

Mixed-use accounting — For properties used both personally and commercially, Xero allows proportional income and expense allocation based on actual usage.

Mixed-use property: income apportionment

The IRD requires you to apportion income and expenses based on actual usage patterns.

Example: A property rented for 90 days and used personally for 30 days (120 total days) has a 75% rental use ratio. Annual expenses of $12,000 × 75% = $9,000 deductible against rental income.

Can you deduct mortgage interest?

From April 1, 2024, short-stay accommodation owners may deduct 80% of mortgage interest. From April 1, 2025, this increases to 100%. New build properties may already qualify for full deductibility — verify with IRD or your accountant.

Adapting to the new landscape

Successfully navigating these changes requires:

  • Meticulous financial record-keeping throughout the year
  • A clear understanding of your GST registration status and obligations
  • Leveraging platform resources (annual summaries) alongside Xero for accurate reporting
  • Engaging a tax advisor — particularly regarding registration decisions and property sale implications

Conclusion

These GST changes reshape the short-stay accommodation landscape significantly. By understanding the new rules, using Xero to track your income and expenses, and engaging tax professionals, property owners can ensure both compliance and optimal financial management.