A small step: the Revenue Account Method enacted

By Joe Sothcott and Sam Mathews

The enactment of the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Act 2026 introduced a new method for calculating Foreign Investment Fund (FIF) income—the Revenue Account Method (RAM)—with effect from 1 April 2025.

For the small group of taxpayers eligible to use it (and particularly US citizens or green card holders that qualify for the extended RAM), the RAM is a welcome introduction. It provides an option for removing some of the rough edges of the FIF rules for migrants and returning expats, including the taxation of deemed income that can give rise to cashflow issues, exposure to double taxation, and practical valuation challenges.

For most taxpayers, however, the introduction of the RAM is unlikely to generate much excitement, given its restrictive eligibility criteria. Most submissions on the Bill introducing the RAM were rejected by Officials, leaving a version of the RAM that (in our view, and the view of most submitters) is unlikely to make material progress towards the policy objective of removing the tax barrier for talented people to come to and live in New Zealand.

That said, there is a positive development: the Government has confirmed that stage two of the RAM project, which is expected to expand access to the method, is underway.

This article, building on our September 2025 Tax Alert article, provides a refresher on what the RAM is, who can use it, what changed in the final legislation enacted by Parliament, what has remained unchanged, and, crucially, what may lie ahead.

Background

The RAM is targeted at recent migrants and returning New Zealanders who have been non‑resident for a significant period, as well as certain family trusts where the principal settlor meets the same criteria. To qualify, an individual must:

• Become a New Zealand tax resident on or after 1 April 2024
• Must not be a transitional resident
• Must have been non‑resident for at least five consecutive years prior to arrival.

The base RAM applies only to eligible foreign shares acquired before becoming a New Zealand tax resident (including before transitional residence). Eligible shares must be:

• Unlisted
• Without a redemption facility at market value
• Not derive 80% or more of their value from listed shares or shares with redemption facilities.

The extended RAM is available for individuals subject to foreign tax on share disposals due to citizenship or permanent residency rather than tax residence. This is primarily aimed at US citizens and green card holders. Where available, the extended RAM may apply to all foreign shares, including listed shares and those with redemption facilities.

Under the RAM, realised gains on eligible FIF disposals are discounted by 30%, with 70% included in taxable income and taxed at marginal rates. RAM losses may offset RAM gains and dividends, with excess losses carried forward. Dividends remain fully taxable without any discount.

For further detail on the operation of the RAM—including elections, cost base determination, and the impact of leaving New Zealand or losing eligibility—see our September 2025 Tax Alert article.

What changed?

A number of technical refinements were made to the final legislation following the Finance and Expenditure Committee process. Key changes include (note this list is not exhaustive):

• Rollover relief confirmed for extended RAM taxpayers in corporate reorganisations where there is no liquidity event or change in the shareholder’s overall economic interest.
• The ability for RAM losses to offset dividend income derived from RAM interests.
• Preservation of eligibility where another FIF calculation method had to be used for the 2025 income year before the RAM becomes available in the 2026 income year.
• Confirmation that the attributable FIF income method may be applied to eligible RAM interests without compromising eligibility to apply RAM to other eligible interests.
• Narrowing of the redemption facility exclusion so that only an effective facility providing access to arm’s‑length market value within a reasonable timeframe and volume disqualifies an otherwise eligible interest.
• Expanded eligibility for treaty non‑residents, allowing New Zealand tax residents who tie‑break to New Zealand under a DTA on or after 1 April 2024 to apply RAM, provided they were non‑resident (under a DTA or domestic law) for at least five continuous years beforehand.
• Consequential relief for pre–tie‑breaker acquisitions, enabling FIF interests acquired before treaty residence in New Zealand to qualify as RAM interests if all other conditions are met.
• Refinements to the income calculation rules to exclude gains and losses accrued during transitional residence, treaty non‑residence, or periods where another FIF method applied.
• Confirmation that RAM may continue to apply where an interest subsequently ceases to meet the eligibility criteria (for example, where an unlisted share later becomes listed), unless the taxpayer elects to apply an alternative method.

What hasn’t been included?

The Government did not proceed with several proposals raised by submitters, including:

• Extending RAM to all foreign shares and making it available to all New Zealand tax residents (and in turn reducing the complexity of the rules).
• Increasing the discount rate from 30% to at least 50%. At 30%, the effective tax rate remains higher than capital gains tax rates in some comparable jurisdictions. A 50% discount was estimated to cost only $448,000 over the forecast period—immaterial relative to total tax revenue ($115.6 billion in the previous year).
• Extending eligibility to other entity types, such as New Zealand resident companies established by RAM taxpayers, or foreign-incorporated companies treated as New Zealand tax residents.
• Permitting RAM to apply where FIF interests are held through a controlled foreign company (CFC), structures that are common among the target migrant population.
• Permitting RAM calculations in a taxpayer’s functional or “home” currency, to reduce foreign exchange risk and make the regime more attractive to its target population
• Replacing the irrevocable election with a consistency requirement, although officials have indicated this may be reconsidered in future.

What next?

Last year, as part of the refresh of the Tax and Social Policy Work Programme, the Government confirmed that stage two of the RAM project is a priority (see our November 2025 Tax Alert article for further detail on the refresh).

Officials have since confirmed in the departmental report that stage two will consider extending the RAM to all New Zealand taxpayers, along with other potential changes such as increasing the current $50,000 FIF de minimis threshold.

Deloitte welcomes this development. If the RAM were to remain in its current, restricted form, it would be a missed opportunity and unlikely to support broader economic objectives. A more meaningful reform would be to allow the RAM to be applied by all New Zealand residents (including FIF interests held in company structures), apply to all foreign shares (not just unlisted shares) and to increase the discount rate to 50%, bringing the effective tax rate more into line with capital gains tax regimes in comparable jurisdictions.

2026 tax returns

For those that qualify for the RAM, you should be considering whether or not to elect to apply the RAM for the 2026 income year. The RAM is technically complex, and this article, like our earlier publications, does not address every aspect of the regime. There will be a number of things to think through before making this election and whether or not an election would be beneficial will depend on your particular circumstances, so we recommend discussing this with your usual Deloitte advisor if this is an option for you.