Motor vehicle FBT
Proposed from 1 April 2027
Day-by-day vehicle availability calculations would be replaced by six use categories carrying set private use inclusion percentages from 0% to 100%. The correct category would depend on expected business and private use, work sites and, for some categories, permanent branding. Separate valuation rates are proposed for petrol/diesel, hybrid and electric vehicles. Because of the detail involved, these proposals are covered in our separate Motor Vehicle FBT newsletter.
Foreign investment funds
Most changes proposed from the 2026-27 income year
Higher de minimis threshold
The cost threshold for application of FIF rules would rise from $50,000 to $100,000.
Expanding Access to Revenue Account Method (RAM)
The proposed amendments would expand access to the revenue account method (RAM) for unlisted foreign shares held by New Zealand resident natural persons and eligible trustees irrespective of when they arrived to New Zealand. This method imposes tax only on actual dividends received and 70% of realized gains. The choice to use the RAM would be subject to a five-year consistency rule to prevent the switching of methods to gain a timing advantage.
The Bill would also allow New Zealand residents who are concurrently taxed in another jurisdiction (due to citizenship or a right to work there) to access the extended RAM for all their foreign shares (listed and unlisted) irrespective of when they arrived to New Zealand.
Remedial FIF amendments
- Indirect FIF interests held through a controlled foreign company could use methods available for comparable direct interests. Effective 01 April 2026.
- The RAM exit tax would also be triggered by non-residence under a double tax agreement from 1 April 2027.
- The FDR method has a ”back up” method “the cost method” that can be used when there is no readily available market value for the FIF interest (i.e. unlisted shares). Under current law FDR method and cost method can be used concurrently by individuals and certain trusts. However, the legislation currently does not permit the concurrent use of CV method for one FIF interest and cost method for another FIF interest. The proposed amendment will allow taxpayers to use the cost method for their FIF interest without readily available market value, while retaining the choice to use the FDR or CV method for their FIF interests with readily available market value (i.e. listed shares) effective 01 April 2026.
- The proposed amendment would ensure that active investors can access the attributable FIF income (AFI) method when their ownership interest falls below 10%, effective 01 April 2026. Currently the AFI method can only be used where the investor holds interest of 10% or more.
- The amendments ensure that the New Zealand investors could continue to access the 10 year FIF exemption when a New Zealand business is acquired offshore and is listed on an overseas stock exchange, effective 01 April 2026.
Foreign-currency financial arrangements
Main proposals from the 2027-28 income year
The proposals are aimed at reducing compliance costs and unexpected taxable exchange gains for migrants and other taxpayers holding foreign-currency loans, deposits and investments.
- Allowing natural person taxpayers (and limited number of family businesses and trusts) to elect to calculate net income on their foreign currency arrangements in a foreign currency. This would prevent exchange rate movement from being factored into both the spreading rules and base price adjustment rules.
- A separate election would allow cash basis treatment for qualifying foreign-source arrangements where citizenship, or work right based taxation overseas could create double taxation, effective 01 April 2027.
- This election will apply to all the person’s foreign currency arrangements and modified base price adjustment will need to be performed for all their foreign currency denominated financial arrangements at the time they elect this method. The taxpayer will be able to elect out of these rules subject to completing modified base price adjustment at the time and would be ineligible to enter back into the rules for 5 years.
- Removal of common low-risk arrangements from the financial arrangements rules, including personal foreign bank accounts, mortgages on private homes and credit cards with foreign banks, effective 01 April 2027.
- Carve outs will apply for taxpayers engaged in, or arrangements commonly used in, exchange rate speculation.
Research & Development Tax Incentive (RDTI)
Most changes from the 2027-28 income year
- Businesses claiming RDTI incentives will be able to receive advances based on their expected R&D tax credits after each quarter. RDTI businesses will need to register with IRD for in year payments and have their R&D activity approved for the relevant income year.
- Each in-year payment would be limited to the lower of 15% of eligible R&D expenditure incurred, the amount of labour-related taxes reported by the business during the income year, and an amount determined by the CIR. Each advance would be capped at 80% of expected R&D tax credits.
- The Commissioner could extend filing dates or accept late amendments where reasonable steps were taken and a genuine mistake, oversight or event outside the claimant’s control caused the failure.
- Mining businesses could claim a wider range of qualifying R&D costs, although prospecting, exploration, drilling and upfront capital expenditure would remain excluded.
- The cap for eligible internal software development costs would fall from $25 million to $3 million per year.
Non-resident contractors
Proposed from 1 April 2027
The monetary exemption from non-resident contractors’ tax (NRCT) would increase from $15,000 to $75,000. The rules introduce a “single payer view” whereby each New Zealand payer would test its own contract payments and the 92 days threshold, rather than needing complete information about the contractor’s other engagements.
Certain established branches, limited partnerships and representative offices could also be excluded where the contractor has an IRD or GST number and at least 24 months’ Companies Office registration prior to payment. Payers would need evidence supporting non-withholding.
Approved issuer levy (AIL)
- From 1 April 2027, the threshold for monthly AIL filing would rise from $500 to $10,000 and borrowers below this threshold would move from six monthly to annual filing.
- The Bill allows IRD to deregister a security after non-compliance with AIL rules. NRWT would then apply unless the security is later re-registered.
- AIL provisions would move from the Stamp and Cheque Duties Act into a standalone Approved Issuer Levy Act without intended substantive change.
Cryptoasset simplification
Relevant disposals from 1 April 2027
- The Bill would introduce two targeted simplification measures for cryptoassets.
- The first would apply to certain “crypto-asset lending arrangements” where cryptoassets are provided to another person or pool and equivalent cryptoassets are returned. The Bill proposes a cost-base preservation rule modelled on the share-lending rules. This means the temporary transfer of a cryptoasset would not create an interim taxing point when there is no material change in the taxpayer’s economic position, provided that the term of this arrangement is 12 months or less. In this case the “crypto-asset lending arrangement” would be classified as an excepted financial arrangement. If there is any taxable gain or loss, it would be recognised when the cryptoasset is finally disposed of.
- The second measure proposes “Stablecoin Exemption” that would exclude qualifying cryptocurrencies that have a stable value relative to a fiat currency from the rule that taxes disposals of personal property acquired with a purpose of disposal. This supports the use of qualifying cryptocurrencies as payment technology without changing the general tax treatment of speculative cryptoasset gains. The proposed amendment would not shelter dealing income, profit-making schemes or speculative gains taxed under other provisions.
Charities and taxable not-for-profits
Subscriptions and smaller organisations
Proposed from the 2027-28 income year
- Membership subscriptions, fees and levies would remain exempt for qualifying not-for-profits prohibited from distributing to members. Member trading and investment income may still be taxable.
- The statutory deduction for small not-for profits would increase from $1,000 to a maximum of $10,000. Not for profits with net income of more than $ 10,000 would no longer be eligible for the statutory deduction of $ 10,000. Associated branches or bodies could not each obtain a separate deduction.
- Eligible smaller organisations would generally be excused from annual income tax filing unless Inland Revenue requests a return.
| Practical point : Even where a small not-for-profit becomes exempt from filing, it should keep full accounting and governance records. Groups with branches should review the association rules before relying on the $10,000 deduction. |
Donation tax credit changes
Proposed from 1 April 2028
Individuals will be able to claim donation tax credits during the year through myIR rather than waiting until year-end. The available in-year amount would be limited to lower of $100,000 and the donor’s taxable income.
Volunteer honoraria
Proposed from 1 April 2028
A not-for-profit could elect to treat volunteer honoraria as salary or wages subject to PAYE instead of schedular payments. This should reduce separate income tax return and ACC obligations for volunteers. The election would not turn the honorarium into KiwiSaver salary or wages.
Non-resident charities
Proposed from 1 April 2028
The exemption for New Zealand-sourced passive income of certain non-resident charities that are not registered here would be removed. Charities registered under the Charities Act and organisations listed in Schedule 32 would retain their existing concessions. Affected non-residents would generally face NRWT, or potentially 2% AIL on qualifying interest.
Private trusts allocating income to exempt beneficiaries
Proposed from the 2028-29 income year
A private trust allocation to a tax-exempt beneficiary would need to be paid into the beneficiary’s bank account within the 6 months of the financial year end or the date the trustee files or is required to file a tax return for the Trust, whichever is the earlier. If the funds are not transferred in time, the allocation would be treated as trustee income and exposed to taxation at 39%. The measure is designed to ensure the exempt beneficiary genuinely receives the funds.
GST changes
- Residential electricity exported to a retailer would be zero-rated from 1 April 2027, removing the mismatch between a retailer’s deduction and GST sometimes omitted by a registered supplier.
- From 1 April 2027, a new rule would allow deductions when pre-registration goods or services begin to be used for taxable supplies. The rules will limit the deduction to the lower of the amount of GST that would have been deductible if the person was GST registered and the fraction of open market value at the time the goods enter taxable activity. The bill proposes a safe harbor threshold for goods and services acquired within 12 months before they start being used in a taxable activity. In this case there is no need to determine the open market value of these supplies. Instead GST is based on the cost.
- The Bill proposes an amendment that would allow non-residents undertaking work in New Zealand who only make zero-rated supplies of services to non-residents to ignore the value of those supplies for the purpose of determining whether they need to register for GST. To preserve GST neutrality for non-residents, GST registration would still be available for non residents who choose to register if they meet the usual criteria for GST registration. This ensures they are still able to deduct input tax on any goods and services they acquire in New Zealand and use to provide their services to their non-resident clients.
Student loans
Overseas-based student loan borrowers
The Bill amends the student loan arrest-at-border offence provision for overseas-based borrowers. Before a warrant can be sought, the Commissioner must prove that the borrower knowingly failed to engage and pay the outstanding debt after receiving a notification. The amendment addresses cases when the borrower has deliberately avoided notifications. In such cases, the amendment would allow the Commissioner to instead rely on earlier engagement with the borrower to establish that the borrower had sufficient knowledge of their obligations and knowingly chose not to comply.
Selected remedial measures
- An amendment to the definition of “hire purchase agreement” applying for GST purposes to clarify that land transactions are not hire purchase agreements.
- Under the current law, there is a range of GST treatments for the supply of an interest in an unincorporated body (such as a partnership, ordinary joint venture, syndicate, or other type of unincorporated association). An amendment is proposed to the definition of “participatory security” applying for GST purposes so that this definition would include an interest in any unincorporated body.
- Amendments are proposed to the rules for GST groups to allow for greater flexibility in how the rules apply in specific circumstances.
- Amendments would clarify that a non-resident supplier is not treated as having a fixed or permanent place in New Zealand (for the purpose of the “resident” definition in section 2(1) of the Goods and Services Tax Act 1985) when using a premises made available by a GST registered customer to make supplies to that customer, provided certain requirements are met.
- An amendment would increase the threshold in the Financial Arrangement Rules under which the straight-line method can be used from $1.85 million to $3 million.
| If you would like to discuss how the proposed changes may affect you or your business, please feel free to contact our office. |
| CONTACT US
Michael Roberts michael@reztax.co.nz
Martina Evans martina@reztax.co.nz
Shane Zhou shane@reztax.co.nz
Our website: https://reztax.co.nz/
T: 09-9661370
L1, 10 Manukau Rd, Epsom, Auckland |
Disclaimer
This newsletter summarises selected proposals in the Taxation (Annual Rates for 2026–27, FBT Simplification, Foreign Investment Funds, and Remedial Measures) Bill (September 2026). It is for general information purposes only and does not constitute tax advice. The Bill may change before enactment; the final legislation and Inland Revenue guidance should be checked before implementation. No liability is assumed by the author or the publisher for any losses suffered by any person relying directly or indirectly upon this newsletter. You are advised to consult a senior representative of the firm before acting upon this information. |
September 2026
