Find out why platforms like Uber and AirBNB are about to get a whole lot more expensive as Matt Harris joins us to talk on the reinstatement of the "App Tax".
The “App Tax” refers to the implementation of GST on transactions occurring within digital platforms, aiming to regulate taxation within the platform economy.
By imposing the App Tax, the government seeks to address the GST collection gap associated with providers operating through digital platforms, ensuring fair taxation across all sectors of the economy.
This tax primarily targets providers whose incomes fall below the GST registration threshold, encompassing a wide range of individuals and businesses operating within the platform economy.
The App Tax officially takes effect on April 1, 2024, signalling a significant shift in New Zealand’s taxation policies and practices.
The tax applies to a variety of services offered through digital platforms, including ride-sharing, food delivery, and short-term accommodation, among others.
Platforms such as Airbnb and Uber are responsible for the administration of the App Tax, including charging, collecting, and remitting GST on behalf of service providers for transactions conducted through their platforms.
GST for Uber Drivers: With the implementation of the App Tax, non-GST registered Uber drivers will now encounter a 15% GST charge on their services. This additional tax burden may result in increased costs for drivers, ultimately affecting their profitability and earnings.
GST for Accommodation Providers: Accommodation providers, including Airbnb hosts, will also feel the effects of the App Tax. The introduction of GST on their services could lead to higher costs for consumers booking short-term accommodation through digital platforms. As a result, hosts may need to adjust their pricing strategies to accommodate the additional tax burden imposed by the App Tax.
Before delving into the technicalities of the App Tax, the team conducted a revealing exercise to uncover their spending habits over the past two years, particularly focusing on their usage of Uber Eats:
Ravi: $2,500
Georgia: $3,100
Mike: $3,700
James: $7,500
Matt: $15,000
This comparison helps to underscore the potential financial implications and challenges that individuals may encounter once the tax comes into effect.
For sole traders operating within the digital platform economy, the GST treatment varies based on their registration status:
Registered Sole Traders: If a sole trader is registered for GST, they are required to inform the platforms of their registration status. In such cases, platforms will zero-rate the income earned by the sole trader and manage the remittance of GST to the Inland Revenue on their behalf.
Non-Registered Sole Traders: In contrast, non-registered sole traders will have GST charged at a rate of 15% by the platforms. Of this amount, 8.5% is then returned to the supplier, while the remaining portion is remitted to the tax authority. This distinction underscores the importance for sole traders to be aware of their GST registration status and its implications for their transactions within digital platforms.
The introduction of the App Tax marks a significant development in New Zealand’s taxation landscape, particularly within the digital platform economy. As the government seeks to address the GST collection gap and ensure fair taxation across all sectors, individuals and businesses operating within digital platforms must prepare for the impending changes.
Preparation is Key: With the App Tax set to take effect on April 1, 2024, it is crucial for individuals and businesses operating within digital platforms to familiarise themselves with the new taxation policies and their implications.
Impact on Service Providers: Non-GST registered Uber drivers and accommodation providers, such as Airbnb hosts, will face increased costs due to the imposition of GST on their services. Adapting to these changes may require adjustments to pricing strategies and financial planning.
Understanding GST Treatment: Sole traders must understand their GST registration status and the corresponding treatment under the App Tax. Whether registered or not, sole traders need to ensure compliance with the new taxation requirements to avoid potential penalties and ensure smooth operations within digital platforms.
In conclusion, navigating the complexities of the App Tax requires proactive engagement and awareness of the evolving taxation landscape. By staying informed and taking appropriate actions, individuals and businesses can effectively manage the impact of the App Tax on their operations and financial well-being.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
