Friday , August 17 2018

Bed tax bites – but not hard enough?

Auckland City Council is facing a barrage of complaints about the harshness of its new Airbnb tax – as a leading industry body reiterates the crackdown doesn’t go far enough.

Numerous short-let hosts have begun lodging appeals against rate hikes of up to 200 to 300 percent in some cases, with many claiming the new tax could force them to delist properties from platforms like Airbnb and Bookabach.

The Accommodation Provider Target Rate (APTR) is based on the value of the property, its location, and the number of bed nights it was booked for in the last year.

It has been extended from a tax on commercial accommodation to cover short-let homes and self-contained units, but not to single rooms in a home, or properties which are rented out for fewer than 28 days a year.

As the bed tax begins to bite, leading industry body Tourism Industry Aotearoa (TIA) has reiterated it opposes the rates system – because it doesn’t go far enough.

“Our view is that to achieve fairness and spread the rate burden, room-only providers should also be included,” said CEO Chris Roberts.

“TIA agrees with Auckland Council that operators providing more than 135 nights should be rated fully at the business rate and the full targeted accommodation rate applied to them.

“For those providing between 29 and 135 accommodation nights a year, TIA believes a 35 percent business rate is more appropriate than the Council’s 25 percent rate.”

So far, the council has logged 1118 people who are offering short-let accommodation online. The total figure is estimated at around 8000 properties (more than 12,000 rooms) on Airbnb alone – although the authority is struggling to discover the contact details for the vast majority of them.

Of the properties identified so far, 828 are rented out for more than 180 days a year and so attract the full tax rate. At the average charge of $213 a night, these hosts could be making up to $78,000 in gross annual income.

Mr Roberts says the council’s inability to implement its own rating policy is a major concern and a source of unfairness.

“The council is expecting payment from just nine percent of Auckland’s Airbnb providers.

“TIA certainly agrees with the council that it is an ‘unfortunate’ shortcoming of the new rating policy that the council cannot find everyone who should be paying it,” he said last month.

While some hosts object to the increases, others are fuming that the charges date from July 2017, with one telling the New Zealand Herald: “People are now being put in a position where they cannot afford to carry on and they can’t afford to stop, because if you stop you’re still going to be charged on the basis of what you did last year.”

The council denies it is a retrospective tax, arguing all rates are set on the basis of what happens in the previous year.

In a statement it said: “If property owners can provide evidence that their property was not being advertised on online accommodation provider websites this financial year, they will not be charged the APTR for this financial year, or the previous financial year.”

A number of hosts plan to de-list from sites such as Airbnb and Bookabach, but have already taken deposits for future bookings.

Phil McNally, from Oneroa on Waiheke Island, told the NZ Herald he rents out a one-bedroom sleepout at his home on a small website. The rates bill on his $1.8m property has gone from $4,191 to $13,628.

McNally said renting out the self-contained unit was no longer viable but argued: “Our bookings have already occurred for next Christmas. So it presents all sorts of problems. It’s going to be a mongrel.”

The accommodation industry has long argued the need for short-let accommodation providers making a significant income from Airbnb to operate on a level playing field with hotels and motels.

Council officers have been able to identify a small proportion of short-let through online websites, but otherwise are reliant on hosts to come forward and register with the authority.

About Kate Jackson

Kate Jackson
Kate Jackson is the editor of Accomnews and Accom Management Guide. You can reach her at any time with questions or submissions: editorial@accomnews.co.nz

One comment

  1. Bed & Breakfast Association New Zealand believes this targeted rate is short sighted, unfair and detrimental to the Auckland region. The Auckland Council (and as quoted in this article Chris Roberts, TIA) appear to have missed some vital elements when introducing this tax.

    A large number of B&Bs or self-contained properties listed on OTAs such as Airbnb are small home based businesses operating from residential properties in the same way as those lawyers, accountants, builders, plumbers, hairdressers do when working from home and, depending on the activity, they incur less infrastructure expense. If a comparative breakdown was to be made of the rating costs between some of these properties and motels / hotels in similar areas it would clearly show that B&Bs pay more than their fair share per room let. And, the ability of B&Bs and small self-contained tourism properties to recoup the cost of commercial rates is severely compromised by both their size and location.

    B&Bs and self-contained tourist accommodation provide a small niche type of accommodation that is sought after by their guests – if guests wanted to stay in hotels and motels they would. Saying that charging commercial rates is leveling the playing field is ridiculous and misleading. B&Bs are required to meet a number of legal obligations under H&S, income tax, Inn Keepers Act, ACC, etc. and the charging of commercial rates does nothing to change this. It simple forces many of these properties to close removing this type of accommodation choice from visitors to Auckland.

    The Association acknowledge’s that everyone needs to pay their fair share towards infrastructure and tourism funding – but this should be fair and equitable. The targeted rate scheme implemented by the Auckland Council is not. It seems to not acknowledge the size of the operation nor the proportion of the residential property. Simply being based on the value of the property and the days they operate is inequitable. If one type of sector based business is to be charged commercial rates then all home based businesses should be charged. Queenstown currently have a model where all home based businesses (regardless of activity) pay a mixed use rate (a one off fee each year).

    The Association also acknowledges that those listed on all OTAs (not just Airbnb) should also contribute to the funding of tourism growth in their regions – but again this should be fair and equitable and should go straight to the funding of tourism growth and infrastructure, not be caught up in other rating issues.

    Charging commercial rates on those properties who have no ability to recoup these charges, will lead to the closure of many B&Bs and self-contained tourist accommodation, removing this accommodation choice from guests to the city. Auckland Council will be paying for staff to track down and charge these businesses, many of whom will close, negating the full benefit of the targeted rate and thus leaving the Council looking for other ways for funding tourism.

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also

From hot press to bench press: $31 million sale heralds new era

The historic home of the New Zealand Herald for more than 150 years has sold for $31 million and will be turned into a wellness hotel.

New hospitality chief joins accom’s movers and shakers

Hospitality New Zealand has a new chief operating officer, the latest in a slew of new appointments for the industry Down Under.