Inland Revenue’s latest interpretation statement (QWBA QB 25/16) clarifies how New Zealand’s income tax rules apply when a close company provides short-stay accommodation.
Importantly, this is a New Zealand Inland Revenue measure, not an Australian tax ruling, and it may have direct implications for Australian-based businesses operating across the Tasman.
The ruling distinguishes between mixed-use asset rules and standard income tax rules:
- Mixed-use asset rules apply when the property is both rented and used privately. Income from rentals is taxable, while some private use by shareholders or associates can result in exempt income. Expenses must be apportioned under strict formulae.
- Standard rules apply when mixed-use criteria aren’t met. The company is taxed on rental income and may deduct related expenses.
Additionally, shareholders and employees who use the property below market rent may be treated as receiving non-cash dividends or employment income.
For Australian SMEs expanding into New Zealand or holding NZ property, understanding these distinctions is essential to avoid double taxation or unexpected compliance costs.
Need cross-border tax advice? Our specialists in Australia–New Zealand tax can help you structure your NZ operations efficiently and meet all local requirements.
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The information in this article is indicative of NZ tax rules and changes and not intended to be complete for all intents or purposes and does not constitute advice. It is recommended that you obtain professional advice, suited to your particular circumstances, from us before acting on anything you read.