Changes to GST for the Platform Economy

In March 2023, legislation in relation to the platform economy was passed, affecting the GST treatment of services made through an electronic marketplace from 1 April 2024. The rules are being expanded to include listed services, such as accommodation, ride-sharing services and food delivery services.

Previously, large market operators like Airbnb or Uber were not liable for returning GST on services that were supplied through their platform. Instead, the home owner or driver would only have to register for and return GST if their taxable supplies exceeded $60k per annum. 

In order to ensure fairness with other operators in the economy, from 1 April 2024, the rules have changed to treat the market operators of these listed services as the supplier for GST purposes. The market operator (the one facilitating the supply of the service) is now liable to account for GST on the rental price to Inland Revenue. 

Essentially, the market operator will now be left with less cash from each transaction. It is likely that these market operators will either look to increase the listing price to the end consumer or reduce the net proceeds paid to the underlying supplier. 

To achieve a similar economic outcome for all operators, a flat-rate credit of 8.5% applies. The market operator must pass on the credit to the supplier. This has the effect of allowing underlying suppliers a standardised input tax deduction against the GST output tax liability.

There is further devil in the detail that should be worked through on a case-by-case basis, such as how the flat rate credit is treated for income tax purposes and to what extent should income tax deductions be claimed for costs that have a mixed purpose.

These rules are now in effect and might explain why the price of some holiday accommodation has just gone up.