Airbnb and the Holiday Home: Mixed-Use Asset Tax
🏖️ When your bach earns income and stays empty
Renting out a bach or holiday home on Airbnb or Bookabach sounds simple, but the tax can catch owners out. Inland Revenue has a special set of rules, the mixed-use asset rules, for a property that in the same tax year is used privately by you, is rented out to earn income, and also sits empty for 62 days or more. Under those rules you cannot deduct a full year of expenses against a few weeks of rent. Instead you apportion your mixed expenses using a set formula, and the cost of the days the property sat empty is simply not deductible. There is an opt-out when the income is small, a loss-quarantining rule when expenses outstrip income, and a separate GST regime for short-stay accommodation booked through a marketplace. Registering for GST can even leave you owing GST when you sell. This guide explains each rule with the current 2026 figures, verified against Inland Revenue, and works through four New Zealand examples so you can see exactly how the numbers fall out.
The three tests for a mixed-use asset
A property is a mixed-use asset for a tax year only if all three of these are true:
- Private use: you, or a person associated with you, use it privately during the year
- Income-earning use: it is rented out to earn income during the year
- Vacant for 62 days or more: it is unused (not rented and not used privately) for at least 62 days in the year
If your property is rented so heavily that it is empty for fewer than 62 days, the mixed-use rules do not apply and the ordinary residential rental rules apply instead. If it is never rented, it is simply a private holiday home with no deductions. The mixed-use rules bite in the middle: a genuine holiday home that you use yourself, rent to others, and leave empty for a good part of the year.
For land, the mixed-use asset rules apply to a bach, crib, holiday home or city apartment that meets the three tests, whatever its value. The rules also cover boats and aircraft above a cost threshold, but for holiday homes there is no minimum value. Companies can own mixed-use assets, but the opt-outs described later do not apply to a home owned by an ordinary company.
Income-earning days and private-use days
The split between these two counts drives everything, so define them carefully:
- Income-earning days are days the property is rented to a paying guest at market rate
- Private-use days are days you or an associated person use it, plus any days you let it to family or friends at "mates' rates" below 80% of the market rent
If you let the bach to friends or family for less than 80% of the going rate, that is treated as private use, not income-earning use. Those days do not add to your income-earning days, so they shrink the share of expenses you can deduct. Charging a discount to a mate can quietly cost you a deduction.
📊 Apportioning your expenses
Once your property is a mixed-use asset, you sort every expense into one of three buckets and then apply the apportionment formula to the middle bucket.
The three expense buckets
| Bucket | Examples | How much you can deduct |
|---|---|---|
| Fully deductible | Costs that relate only to renting: listing and platform fees, guest cleaning, advertising | 100% |
| Apportioned | Costs for the whole property: rates, insurance, mortgage interest, general repairs | By the formula below |
| Not deductible | Costs that relate only to your private use | 0% |
The apportionment formula
For the apportioned bucket, the deductible share is:
Because the vacant days never appear in the formula, you can never deduct the cost of the days the property sat empty. This is the heart of the mixed-use rules: the expenses of an idle holiday home are treated as private, not as a cost of earning income.
From 1 April 2025 interest on residential property is fully deductible again, so for the 2026/27 year you can claim 100% of your mortgage interest, then apportion it under the mixed-use formula like any other whole-property cost. In earlier years the interest limitation rules had cut this back, so older advice may understate your interest deduction.
A quick worked split
Suppose the bach is rented at market rate for 45 days, used privately for 30 days, and empty for the rest of the year. Whole-property costs (rates, insurance, interest, upkeep) come to $20,000.
You would then add any fully deductible rent-only costs on top, and none of the purely private costs.
🧾 The opt-outs, GST and the sale
The low-income opt-out
If your gross income from renting the property is low, you can choose to leave the property out of your tax return altogether. You declare no rental income and claim no expenses. You can use this opt-out if:
- your gross income from the income-earning use is less than $4,000 for the year, or
- the activity is loss-making and that gross income is less than 2% of the property's value
The opt-out is a choice, not compulsory, and it does not apply to a property owned by an ordinary company. It is useful when you rent the bach for only a week or two and the paperwork would outweigh any tax.
The loss-quarantining rule
If you do return the property and your deductible expenses come to more than your rental income, you may not be able to claim the whole loss in that year. Where your gross income from the income-earning use is less than 2% of the property's value, your deductions are capped at the amount of that income, so the activity cannot create a tax loss. The excess deductions are quarantined and carried forward to a future year when income is higher. A loss that recurs year after year is a sign the property is really private.
GST on short-stay accommodation
Short-stay accommodation is a "listed service". From 1 April 2024, the online marketplace you book through, such as Airbnb or Bookabach, must collect GST at 15% on your bookings and pass it to Inland Revenue, even if you are not GST-registered yourself.
- If you are not GST-registered: the marketplace keeps 6.5% and passes you an 8.5% flat-rate credit, which is yours to keep. It recognises the GST built into your own costs
- If you are GST-registered: the marketplace treats your supply as zero-rated to it, and you account for GST on your return in the normal way
- The $60,000 threshold: you must register for GST if your turnover from all taxable activities, including short-stay rental, is over $60,000 in any 12-month period
Registering for GST voluntarily, for example to claim GST back on a renovation, brings the property into the GST net. Once it is used to make taxable short-stay supplies, GST will generally apply when you sell it, and when you stop using it for that purpose. The GST on a future sale can dwarf any input tax you claimed. You may be able to treat the sale as non-taxable only if you never claimed a GST deduction for the property and did not buy or use it mainly for taxable supplies, so think hard before you register.
The bright-line test
A holiday home is residential property, so the bright-line test can tax the gain if you sell too soon. For any property sold on or after 1 July 2024 the period is 2 years. Sell within 2 years of buying and the gain is taxable unless an exclusion applies. A bach that you rent out is unlikely to qualify for the main-home exclusion, so plan your sale timing with the 2-year clock in mind.
🔢 Four worked New Zealand examples
These examples use realistic figures to show how the mixed-use and GST rules play out. Your own numbers will differ, so use them as a method.
Situation: The Wilsons rent their bach to holidaymakers for 40 days at market rate, earning $12,000. They use it privately for 30 days, and it sits empty for the remaining 295 days. Whole-property costs (rates, insurance, interest, upkeep) are $16,000, and rent-only costs (cleaning, platform fees) are $2,000.
Step 1: Confirm it is a mixed-use asset
Step 2: Apportion the whole-property costs
Step 3: Net taxable rental income
Situation: Rangi lists his South Island crib on Bookabach and rents it for just 12 days over summer, earning $3,200. He uses it himself for 25 days, and it is empty for 328 days.
Does the opt-out apply?
By using the opt-out, Rangi declares no rental income and claims no expenses for the crib. It removes the paperwork when the letting is small. He owns it personally, so the opt-out is available. If a company owned the crib, it could not use the opt-out.
Situation: The Taylors bought a bach for $650,000 and earn $35,000 a year from short stays, which is below the $60,000 GST threshold, so they do not have to register. A friend suggests registering to claim GST back on a $50,000 renovation.
The one-off input claim:
The cost when they sell:
As unregistered owners, the Taylors already receive the 8.5% flat-rate credit through the marketplace, which recognises the GST on their costs. Registering to grab a $6,522 renovation credit risks a GST bill of over $117,000 when they sell, unless a specific exception applies. For most owner-operated baches, staying unregistered is the safer position.
Situation: The Fishers use their bach themselves for 50 days. They also let it to extended family at a discounted $60 a night for 30 days, and to the public at the market rate of $220 a night for 25 days, earning $5,500. It is empty for 260 days. Whole-property costs are $18,000.
Sorting the days:
Apportioning the costs:
If the Fishers had rented those 30 days to the public at market rate instead, the days would have been income-earning and their deductible share would have jumped. Because they gave family mates' rates below 80% of market, those days counted as private use, so their deduction stayed low. The rent they collected from family is not income-earning use.
Related tools and guides
- GST mixed-use apportionment calculator
- Airbnb GST threshold calculator
- GST adjustment calculator
- Airbnb vs long-term rental calculator
- Bright-line test calculator
- Platform economy GST guide
- Tax on rental income guide
- Bright-line test guide
Verified July 2026 against: Inland Revenue, mixed-use assets (the 62-day test, apportionment formula, the $4,000 income opt-out and the 2% loss-quarantining rule); Inland Revenue, GST on listed services and short-stay accommodation (15% collected by marketplaces from 1 April 2024, the 8.5% flat-rate credit, the $60,000 registration threshold, and GST on sale); Inland Revenue, residential property interest rules (interest fully deductible from 1 April 2025); and Inland Revenue, the bright-line test for property sold on or after 1 July 2024.
🎯 Test Your Knowledge
Complete this 10-question quiz to check your understanding of the mixed-use asset and short-stay GST rules
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