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LETS GET DOWN TO BUSINESS.

Question :
Hello,I am running a small bed & breakfast with two rooms, quit a stressful job as a chef in October last year and welcomed my first guests end of January this year. It is a lot of work, with cleaning, preparing breakfasts, picking up and dropping off guests from airport and town.i am doing this as a sole trader as it was advised by my accountant and you can read the same on IRD’s website. But IRD told me now it is not a business and I have passive income. Well, at the end of a day it doesn’t feel like being passive. Why is this now not considered a business? My accountant told me, that I can claim costs against my business income which wouldn’t be possible if it is not a business.

Question submitted 23/05/20 @ 05:49am
Industry: Funding & Finance
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  • Hi. Accommodation rental can be passive income, but when provided as part of a B&B would typically be a business. Either way, you are entitled to claim a deduction for expenses incurred in earning your B&B income. Operating as a sole trader doesn’t alter this and is a perfectly fine and normal way to operate. Are you a member of the association?, which has lots of good guidance on operational considerations and relief measures under COVID—19 http://www.bandbassociation.co.nz

    Great advice from Darren White – sometimes we can be misinterpreted when we tell people like the IRD and maybe use language that leads them to think you are doing something different to what you are – you are running a business and you should be able to recognise all revenue as ‘business revenue’ and likewise any direct costs as ‘business costs’ – wishing you all the best with resolving this – if you don’t feel you can with the IRD – they are typically very understanding (try again) reach out to that Association. Good luck.

    Thank you very much Darren and Andrew.
    I will try to talk to them a d post the outcome here.

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