Airbnb operators may be hit by bed tax

Auckland Council is not considering registering landlords despite indications of non-compliance in London. Photo / Brett Phibbs

Auckland Council is looking at applying the new hotel and motel bed tax to Airbnb operators.

But it has no plan to compile a register of longterm rental properties despite a report that indicates that half of the landlords in one London borough did not declare rental income.

The borough of Newham found that 13,000 of 27,000 registered landlords had not signed up for self-assessment with the British tax office, according to a report in the Guardian.

British landlords are required to register if they receive £2,500 or more in rent a year. Newham council estimated that unpaid tax could amount to £200 million across London.

The information emerged after the borough introduced a compulsory licensing scheme for landlords in 2013 and shared the data with tax authorities.

Auckland Council doesn't have a register or any record or estimate of the number of landlords or rented properties in the Super City.

Queenstown Lakes District Council has done an audit of properties in its area being offered for holiday accommodation and was pursuing about 800 landlords who may face a higher rates bill.

Queenstown homeowners can let their property once a year for up to 28 days without it affecting their rates. But letting their homes multiple times would make them eligible for a rates bill 25% higher.

Auckland Council is not considering registering landlords despite indications of non-compliance in London. The council doesn't regulate landlords or treat rental properties any differently to those occupied by the owner, a spokeswoman said.

But it considering applying the new hotel ($3 to $6) and motel ($1 to $3) bed tax to the informal accommodation sector, including Airbnb.

"The council has asked staff to look at ways to apply the new targeted rate for accommodation providers to the informal accommodation sector, which includes Airbnb type properties.

"Until that work has been completed, we won't have clear estimates of the number of properties or rooms that are available."

Inland Revenue doesn't keep a database of residential landlords and a spokesman said it would not comment on the merits of councils collecting and sharing such information.

However, Queenstown council confirmed that IRD had been in contact.

"The IRD has the ability to request [the information] and it wouldn't surprise me if the do," said the council's chief financial officer, Stewart Burns.

He said it was likely that those who were wilfully not complying with their rates requirement were doing the same regarding tax.

Queenstown has a rental crisis exacerbated by properties that might otherwise be available to longterm renters moving to the shorter holiday market such as Airbnb.

Hotels and motels complied with the higher rates for visitor accommodation that helped pay for facilities put under pressure by high numbers of tourists.

Those breaching the rules could be prosecuted under the Resource Management Act but Burns said the council preferred to make those who let their properties to holidaymakers aware of the rules and for them to comply.

The IRD would only say that it used "a range of analytical tools to the data we collect to help identify non compliance".

"Once hidden economy activity is identified, such as a landlord not declaring rental income, we take action," the spokesman said. "This includes investigations, shortfall penalties and interest, and prosecution activity."

"As with other areas of the economy, there is no way for Inland Revenue to accurately estimate the amount of rental income that is not being declared."

Tax professor Craig Elliffe said that although a lot of New Zealanders were used to not filing tax returns because they are not required to, his gut feeling was that tax compliance was quite strong.

"I'd like to think, and maybe it is wishful thinking, that the majority of people ... [who] have got rental properties would file a return."

Elliffe had not seen any blatant behaviour by clients when he was in practise. "Maybe naively but I do suspect we do have quite high levels of tax compliance but I might be proved dramatically wrong as these figures would suggest."

He noted that data matching between Government departments was a big and growing trend.

NZ Property Investors Federation's Andrew King said he didn't think their was any significant failure to pay tax among investors.

He understood from interactions with the IRD that its property compliance unit focused on property speculators who claimed to be investors in order to pay less tax.