Tax Updates: 1 September 2025

Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion on any national or international tax issues, please contact Richard via email at richard@gilshep.co.nz.

Tax Bill introduced

The Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill was introduced into Parliament. Now, I can hear you all beginning to froth with excited anticipation, so without further delay, the Bill proposes to:

• Provide relief to New Zealand (NZ) visitors (to be defined as “non-resident visitors”) from potential NZ tax obligations, which may be triggered by the visitor undertaking work activities for their employer or clients in their country of tax residence while in NZ. You may have heard the term “digital nomad” used on occasion, which describes a person pursuing a lifestyle involving remote working from different countries. Without digging into the weeds of the proposal, effective from 1^st April 2026 (provided the visitor is a tax resident of another country when visiting NZ and they are present in NZ for less than 275 days in any 18-month period), then the 183-day presence rule will not apply to them to trigger an NZ tax resident status. Should the non-resident visitor stay for 276 days, a NZ tax residency status will generally apply on a prospective basis from day 276. From a GST perspective, a non-resident visitor who expected to invoice their non-resident clients more than $60k in a 12-month period could elect whether or not to register for GST—naturally, their invoices would be zero-rated for GST, but they may still wish to register to be able to recover GST input tax charged on NZ expenses.

• Introduce a new Foreign Investment Fund (FIF) calculation method—the revenue account method. The new method (effective from 1^st April 2025), affectionately referred to as RAM, would allow certain FIF interests to be taxed on a realisation basis—that is, on dividends derived and gains or losses on disposal. Gains and losses are first discounted by 30%, before the gain is taxed at the person’s marginal tax rate, or the loss is applied (only) against gains from the disposal of other RAM FIF’s—otherwise carried forward to the following income year. You must have been a non-resident for at least five years before becoming an NZ tax resident to use RAM, and persons who become non-resident remain taxable on RAM FIF’s if sold within 3 years of becoming non-resident (good luck with policing that one, Inland Revenue (IR)—although I note the “deemed disposal” rule proposed at date of exit). To be eligible for RAM, the FIF must have been acquired prior to the person becoming an NZ tax resident, and the share must not be listed, nor have a redemption facility for market value in relation to the share. There will also be an “extended” RAM, where all foreign shares will be eligible if the person is generally liable to tax in another country on the disposal of those shares on the basis of their citizenship or a right to work and live in that country. Think, predominantly, United States citizens.
  
• Allow the members of a joint venture to choose to individually account for GST on supplies made or received in the course of the venture under their own GST registrations (referred to as “flow-through treatment”) rather than registering the joint venture separately—effective from 1^st April 2026.

• Allow unlisted companies to elect into a regime where the tax liability for employees who receive shares or share options as part of an employee share scheme (ESS) can generally be deferred until the shares can be more easily valued and sold. A defined “liquidity event” under the proposals—application to share benefits provided from 1 April 2026. Naturally, however, the value used to determine the assessable income of the employee will also be deferred until the liquidity date, so some caution in the wind perhaps to jumping in too early to elect the shares to be “employee deferred shares.” The definition of a “liquidity event” is presently the earlier of listing of the company, sale or cancellation of the shares, or payment of a dividend in respect of the shares.

• Provide that a change in a newly GST-registered person’s filing frequency will take effect on the start date of their registration, if they apply for the change within a specified timeframe. Presently, if you make a mistake when registering your client for GST (or they do it themselves), a change to the filing period can only apply from the client’s next taxable period. The corrected filing period will apply from the date of registration, provided the application to correct the error is made before the earlier of:
  • seven days after the due date of the GST return that corresponds with their first taxable period (being their current taxable period that they are applying to change from), or
  • the due date of the first GST return that corresponds with their intended taxable period (being the taxable period they are applying to change to)

• Exclude SaaS contract payments from the non-resident contractors tax rules with effect from 1^st April 2026. Presently, uncertainty over whether NRCT (non-resident contractors tax) should be withheld by the payer, due to the definition of “contract activity,” which includes the right to use a non-resident’s personal property (the SaaS product) in NZ. Going forward, unless the SaaS provider has infrastructure or personnel located in NZ, their contract payments will be exempt from NRCT.

• Increase certain financial arrangement rules thresholds (which have not been amended since 1999!), seeing the variable principal debt instrument value jump from $50,000 to $100,000, and for determining a “cash basis” person: income/expenditure from $100,000 to $200,000; absolute value of financial arrangements from $1m to $2m; and the deferral threshold from $40,000 to $100,000. Certainly a welcome change, with application from the 2026-27 and later income years.

And for those of you with solar power systems at home who receive credits from your electricity company for excess power that you export into the grid ($1.30 if I look at my latest power bill), sensibly, the Bill confirms that such credits will not be considered assessable income of the homeowner. But note the reference to natural persons (not those acting in capacity as trustees, therefore) and dwellings (not commercial, therefore).  

This article was originally published through the ‘A Week In Review’ newsletter. If you would like to receive Richard’s tax updates every Monday morning, you can subscribe here.