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AJML Accountants Update – June 2018

Internet based business – Airbnb (part 1)

In a similar vein to Uber, Airbnb is also a technology-based business. Broadly speaking, Airbnb uses technology (Airbnb app and website) to match people looking for short term accommodation (guests) with homeowners (hosts) who are looking to earn extra money from renting out all, or a part of, a dwelling. Airbnb is hugely successful; it is present in over 34,000 cities across 190 countries with 1.2 million property listings that have served over 35 million guests.

Airbnb is attractive to homeowners, because it offers flexibility and a higher return and for guests because the rates are often less than the cost of a hotel.

How does Airbnb work?

As noted, Airbnb uses technology to facilitate a short-term accommodation service. The key players, and the flows of funds, involved in the Airbnb business model are broadly as follows:

  • Hosts – The host are the people who own property and want to make some money by renting out their available space, which could be the whole of a property they own or part of a property that they also occupy as a residence. The host creates a listing on Airbnb including property details, amenities and cost, etc. Hosts are free to accept or reject a booking. Some of the amenities a host may offer with the accommodation include linen and breakfast. The host is responsible to greet guests and give them keys, arrange for cleaners.

Note that a host could also be someone who lists a property that they rent (not own) (not that this scenario is not specifically dealt with in these notes).

  • Guests – These are people who book the listed available spaces from local hosts. Guests have the option to search for a property by filtering them according to rent, amenities, location etc. and can book the desired home through the Airbnb app or website.
  • Airbnb – Among other things, Airbnb facilitates accommodation services by providing and maintaining the necessary technology (e.g., the Airbnb app), collecting payments from guests and passing payment to hosts (after deducting a set commission fee). It is also understood that Airbnb provides a certain level of insurance cover for hosts (without cost) and pays for freelance professional photographers to photograph listings where possible.

Is Airbnb income subject to GST?

In the vast majority of cases, the supply of accommodation via Airbnb constitutes an input taxed supply of residential rent. Where this is the case, there is no requirement to remit GST on the Airbnb income (and the host is also not entitled to claim ITCs on any acquisitions relevant to the supply of accommodation).