Bach Taxes

Bach Taxes

I recently read an article by Mike O’Donnell in the Dominion Post on the planned new bylaw changes to hit Bach owners and I felt “poor things” – imagine having to pay tax on income derived from renting out your Bach and not being able to claim all your expenses, etc. I am sure that all those people who faithfully pay taxes will be hugely sympathetic to the plight of Mike O’Donnell and his fellow Bach owners.

The rise of the holiday home as a form of accommodation has come at a cost, and the cost has been borne by those that operate commercial accommodation. Holiday homes operate outside the rules applied to commercial accommodation. They do not have to comply with the fire regulations and the building codes. They do not have to pay commercial rates or water rates, pay to have their rubbish removed or for building warrant of fitnesses and the myriad of other charges that local authorities levy. They are, however, able to compete via the internet directly with the hotels, motels, holiday parks, backpackers, etc who are required to comply with all these regulatory impositions and costs.

It is very difficult operating in a commercial accommodation environment. Currently, the full force of the global economic meltdown has affected both the domestic and international markets and it is quite galling to have a set of competitors that do not play, and pay, on the same playing field as you do. It also seems blatantly unfair that those Bach owners can claim the significant costs, and mitigate their tax expenses, while those that operate on wages and salaries cannot. The obvious outcome of this is that those that can’t make deductions are actually subsidising those that can.

There are a huge number of anomalies operating in the commercial accommodation market. It is absolutely unnecessary to get any licences or have to register in any way to turn domestic accommodation into commercial accommodation. There is no need to go through resource consent, building consents or anything of that nature to open up your house, front room or your back room to visitors. The rules that are imposed on commercial accommodation related to fire, safety, noise, parking, building types and styles, etc, are not required in these domestic operations. The ongoing costs that are associated with ensuring that the local council is satisfied with your ability to operate under such regulations as commercial accommodators are required to do, do not apply for batches, holiday homes, etc.

The stringent rules applying to commercial accommodators and enforced by the local authorities not only are expensive, they are also inhibiting. They can create an enormous strain on the profitability of the commercial accommodators, especially when their competition are not bearing these costs and are therefore able to offer their properties at a far lower price and still make a profit on it! Now they are complaining that they have to pay tax on that income.

It is interesting in New Zealand that you need a licence to open a sandwich bar but not to have private accommodation turned into commercial accommodation; ie to charge people for staying at your place. It is time that the whole concept of the rules applying to both commercial and residential accommodation that is sold be reviewed. We need to ensure that those people that stay in all accommodation types are offered the same levels of safety and security. This is not currently the case. We need to ensure that the same legal regulations and costs apply equally across the board. This is also not the case and we need to ensure that the level of contribution made to the state, by way of taxation for both commercial and domestic accommodation providers, is the same. Currently, it is not.

We have a saying in New Zealand about the level playing field. Currently, in accommodation it is the vertical playing field with those that are making the investment in commercial accommodation at the bottom end with everything falling on top of them.

Michael Baines

Chief Executive

Motel Association of New Zealand

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