Should a trust own your holiday home? The hidden GST trap when you rent it out
Putting the family bach in a trust can make good sense — for succession, for protection, and for keeping it in the family across the generations. But the moment you begin renting it out on Airbnb or Bookabach when nobody is there, the tax picture changes sharply. For a trust in particular, the combination of the marketplace “app tax”, the family’s own use of the property, and the rules on selling can produce a GST bill that outweighs the benefits of the trust.
We should say plainly at the outset: we are not tax or GST specialists, and nothing here is tax advice. GST on holiday homes is one of the most technical corners of New Zealand tax law. This article explains the shape of the problem so you know the right questions to ask — the answers need a specialist tax adviser or accountant working on your actual numbers.
KEY POINTS
• A trust is often the right home for a bach held purely for family use, succession and protection.
• From 1 April 2024, platforms such as Airbnb must collect 15% GST on every booking, whether or not you are registered.
• If the trust is not GST-registered, the platform keeps 6.5% for Inland Revenue and passes an 8.5% flat-rate credit back to you.
• Family use of a trust-owned bach is a “deemed supply” at market value — it counts toward the $60,000 GST threshold.
• Once a property is in the GST net, selling it can cost roughly 3/23 (about 13%) of the full sale price in GST.
Why families put a bach in a trust
There are sound, well-established reasons to hold a holiday home in a family trust. A trust can keep the property out of any one person’s estate, help it pass smoothly to the next generation without a forced sale, offer protection against certain relationship property and creditor risks, and provide a clear framework for who may use the property and how costs are shared. For a bach that stays in the family and is never let commercially, a trust is often exactly the right structure.
The difficulty begins when the family decides to rent the bach out to third parties — typically through Airbnb, Bookabach or a similar platform — during the weeks nobody is using it. That turns a private family asset into a commercial activity under the GST rules, and trusts face a particular trap that individual owners do not.
What changed: the marketplace “app tax”
Since 1 April 2024, New Zealand’s GST “marketplace rules” require online accommodation platforms to collect GST on short-stay bookings — at the standard 15% rate, regardless of whether the underlying owner is registered for GST.
If the trust is not registered for GST, the platform passes back an 8.5% “flat-rate credit” — yours to keep, intended to recognise the GST buried in your running costs — and remits the remaining 6.5% to Inland Revenue. If the trust is GST-registered, it tells the platform, receives its income net of GST as a zero-rated supply, and can keep claiming GST on its costs.
So far, this applies to anyone renting out short-stay accommodation, whether they own personally or through a trust. The real divide opens up over two things: the $60,000 registration threshold, and what happens when the family uses the bach themselves.
The trap that catches trusts: your own family’s use
A trust must register for GST if its taxable supplies exceed $60,000 in any 12-month period. The catch lies in what counts toward that $60,000.
The settlors and beneficiaries of a trust are “associated persons” of the trust. When an associated person uses trust-owned property, GST law treats it as a supply by the trust at open-market value — even if no money changes hands, and even if the family pays the trust less than a market rate. That “deemed” market-value amount is added to the trust’s actual rental income when the $60,000 line is tested.
An example makes the danger clear. Suppose a trust earns $45,000 from Airbnb in a year, and the family stays for 50 nights at $400 per night. Those 50 nights are a deemed supply worth $20,000. Add that to the $45,000 of real income, and the trust is at $65,000 — over the threshold, and now required to register for GST. The family’s own holidays have pushed the bach into the GST net, on income the trust never actually received.
One point is worth making because it is often stated the wrong way round. The family’s deemed private use is a GST issue, not an income-tax one. The trust does not pay income tax on the hypothetical value of the family’s stays, and where the family does pay the trust for their nights, that amount is generally treated as exempt income for income tax purposes. The sting is in GST — and specifically in what happens next.
The one thing most people get wrong: the bill on sale
Here is the part that turns an annoyance into a genuinely expensive mistake. Once a property is inside the GST net, GST must be accounted for when it is sold — or when the trust deregisters, or stops using it commercially. And it is calculated on the property’s market value at that time, not on what you originally paid.
In practical terms, the GST on sale is roughly 3/23 of the sale price — about 13%. On a bach that sells for, say, $2.3 million, that is around $300,000 of GST. The GST you were able to claim back on the way in, by contrast, is limited to the tax fraction of the original purchase price and your taxable-use percentage — often a far smaller figure. Commentators describe the result as a rough 13% “proxy” capital gains tax on the whole value of the property. For a long-held, high-value holiday home, that single figure can wipe out years of rental returns.
This is why many tax specialists advise that, if commercial or Airbnb renting is on the cards, a trust (or a company) is often the wrong owner for a holiday home — precisely because associated-person use so easily drags it into the GST net. An individual who owns and uses their own bach does not make a deemed supply to themselves, so their own use does not inflate turnover in the same way.
So — trust or individuals?
The answer is: it depends, and it turns on how the property will actually be used.
If the bach is for family use only, with no commercial letting, a trust can remain an excellent structure for succession and protection, and the GST traps above simply do not arise.
If you intend to rent it out to third parties, the ownership decision needs to be made with a tax specialist before you buy or list — weighing the succession and protection benefits of a trust against a potential GST liability on sale that can run to six figures. Sometimes the answer is individual ownership; sometimes it is a trust with the property kept firmly out of the GST net; sometimes it is a different structure again. There is no one-size-fits-all answer, and the cost of getting it wrong is high.
What you can do — and where we can help
• Decide the use first. Will the bach ever be rented commercially? That single fact drives the structure.
• Get specialist tax and GST advice on the numbers before you commit — ideally before purchase. This is not a DIY area.
• Review an existing trust. If your trust already owns a bach and you are thinking of listing it, take advice before the first booking, not after.
• Get the trust itself right. Whatever the tax answer, the trust deed, memorandum of wishes, and record-keeping should be sound and up to date under the Trusts Act 2019.
RHL can advise on the trust and estate-planning side — establishing or reviewing a family trust, its deed, and succession for a holiday property — and work alongside your accountant or tax specialist on the ownership decision. We do not give GST or tax advice ourselves; that is a specialist field, and we are happy to work in tandem with your tax adviser.
Where to get information
• Inland Revenue — short-stay and visitor accommodation (ird.govt.nz)
• Inland Revenue — GST adjustments for mixed-use assets (ird.govt.nz)
• The Goods and Services Tax Act 1985 and the Income Tax Act 2007 (subpart DG, mixed-use assets), at legislation.govt.nz.
• Your accountant or a specialist tax adviser — essential before buying or listing.
Thinking about a holiday home — or already own one in a trust? RHL can review or establish your family trust and work with your tax adviser on the right ownership structure.
Get in touch.
This article is general information only and is not legal or tax advice. In particular, we are not tax or GST specialists, and the GST treatment of holiday homes is highly technical and fact-specific. Please obtain specific advice from a tax specialist and a lawyer before acting.
