QWBA’s on Trust Property rented for short-term accommodation finalised

Canvased in a previous AWIR when the drafts were initially released for public feedback, IR have now released the finalised versions.

QB 19/15 deals with a scenario where a beneficiary of the trust rents out the trust property for short-stay accommodation, and considers the question of who should declare the income for tax purposes and what deductions can be claimed.

In summary:

• The beneficiary will derive the short-stay accommodation income because it is their interest in land that is affected by the property being rented out.
• The beneficiary may be eligible to use the “standard-cost method” for meeting their tax-obligation.
• Some expenses will be fully deductible; others may be only partly deductible because they also relate to the private use of the property.

On the other hand, QB 19/16 looks at the same questions but from the perspective of the trustees of the trust being the party who rents the trust property out for short-stay accommodation. In this regard, it is the Commissioners view that:

• Where the trustees rent out the property — any income from renting the property out for short-stay accommodation will belong to the trustees and will need to be returned by them.
• The deductibility of the (non-capital) property-related expenses depends on whether the expense is incurred by the person deriving the income — in this case the trustees. Sometimes in a family trust situation, this will not be the case.
• Some expenses will be fully deductible; others may be only partly deductible because they also relate to private use or non-income-earning use of the property. 

This article from the ‘A Week in Review’ newsletter was originally published; Monday 20th January 2020. If you have any questions or would like a second opinion on any national or international tax issues, please contact me [email protected]. 

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