Subletting and Short-Stay Hosting Your Rental

The council question

District plans treat short-stay accommodation as a use of land, and uses of land are what district plans regulate. Some councils permit it outright, some permit it up to a number of nights a year, and some treat it as a commercial activity in a residential zone that needs resource consent.

There is often a rates dimension too. A property used substantially for short-stay accommodation may be rated differently from an owner-occupied home, and that reclassification can be worth more per year than a handful of bookings.

Body corporate and covenants

An apartment adds a further layer. Body corporate operational rules can restrict or prohibit short-stay letting, and those rules bind you as an owner. Some titles also carry covenants that limit the use of the property. Both are enforceable, and both are easier to read before you list than to argue about afterwards.

Insurance sits alongside this. A standard house or contents policy is written for a home, not for paying guests. Tell your insurer what you are doing and get the answer in writing.

Income tax on short-stay income

Short-stay income is taxable. There is no equivalent of the boarder standard-cost method that quietly removes it, and the platform reports what it pays you.

Against that income you can deduct expenses relating to earning it. Where the property is used both privately and for guests, the expenses have to be apportioned, and there are specific mixed-use asset rules for properties that are used privately, used to earn income, and left empty for periods during the year. Those rules are more restrictive than ordinary rental apportionment and catch a lot of holiday homes.

The short-stay versus long-term rental calculator compares the two on a net basis rather than a headline nightly rate, which is where short-stay usually looks less dominant than it first appears once cleaning, vacancy and management are counted.

GST, and the part that surprises people

Supplying short-stay accommodation is a taxable activity for GST. Once your turnover from all taxable activities exceeds $60,000 in a twelve month period, or you expect it to, registration is compulsory.

The short-stay GST threshold calculator shows where your bookings sit against the threshold. Note that it is a rolling twelve month test rather than a tax year test, so a strong summer can trigger it mid-year.

Working out whether it is actually worth it

The nightly rate is the most visible number and the least useful one. What decides the outcome is the net figure after everything that a long-term tenancy does not cost you.

Run it properly with the nightly rate calculator to work out what rate you would actually need, then compare against a long-term tenancy on the same property.

What this guide does not cover

Commercial accommodation businesses, motels and holiday parks operate under different rules. The bright-line test and other property tax rules can be affected by how a property is used, which is its own subject. Overseas hosts and non-resident owners have additional obligations. This is general information rather than tax or legal advice, and the GST position in particular is worth an accountant's time before you cross the threshold.

Test Your Knowledge

Ten questions on letting out space you already pay for.

Sources: Tenancy Services on subletting and assignment, Inland Revenue on short-stay accommodation, mixed-use asset rules and GST registration, and your local council's district plan. District plan rules and rating categories vary considerably by council and must be checked locally.