Latest tax bill continues the focus on incremental change

By Robyn Walker

As we quickly edge towards the end of the 54th Parliament, we have seen one last omnibus taxation bill tabled in Parliament, putting an end to a term marked by tax reform aimed at reducing compliance costs.

The stars of the Taxation (Annual Rates for 2026-27, FBT Simplification, Foreign Investment Funds, and Remedial Measures) Bill (the Bill) are reforms announced as part of Budget 2026, along with a plethora of other remedial changes aimed at fixing niggles and minor errors.

While Fringe Benefit Tax (FBT) and Foreign Investment Fund (FIF) reforms are the headline measures, the Bill contains over 70 other changes, almost all of which are taxpayer favourable and focused on improving tax legislation. It is not possible to cover every change when the list runs to four pages, but we can highlight those likely to be of most interest to Tax Alert readers.

FBT on motor vehicles

After being in place for more than 40 years, the FBT rules for motor vehicles are finally having a major overhaul. Refer to our separate article for more details.

Foreign Investment Fund rules

Last year’s omnibus tax bill introduced a new FIF calculation method, the Revenue Account Method (RAM). The latest Bill expands eligibility to use RAM and makes several other improvements to the FIF rules, including doubling the de minimis threshold from $50,000 to $100,000, meaning fewer people need to apply the rules. Refer to our separate article for more details.

Financial Arrangement rules

The FIF rules were initially modified to ensure they did not adversely affect migrants. At that stage, people also began pointing out that the financial arrangement rules were an equal deterrent to high-net-worth individuals because of the need to bring foreign currency fluctuations to tax. The Bill provides a new option for eligible taxpayers to elect a functional currency other than NZD with effect from 1 April 2027. In practice, certain exchange rate movements against the NZD will no longer be included in financial arrangement calculations, meaning unexpected, and often unrealised, exchange rate gains or losses will not catch taxpayers by surprise. A number of other changes to the Financial Arrangement rules, predominantly with the purpose of attracting and retaining talented migrants, have also been included in the Bill. Refer to our separate article for more details.

Research and Development Tax Incentive

The Bill includes legislation for a number of changes announced in Budget 2026:

• The ability for taxpayers to apply for in-year tax credits from the 2027/28 income year
• Removing excess restrictions on mining businesses to allow R&D to be claimed on an equal footing with other businesses
• Lowering the internal software development cap from $25 million to $3 million
• Introducing a Commissioner’s discretion to fix genuine errors
• Allowing partners in a partnership to use the partnership balance date when making RDTI claims

Approved Issuer Levy

The Approved Issuer Levy (AIL) has been improved in previous bills to give the Commissioner greater discretion to fix genuine errors. This Bill makes further improvements, including reducing the filing frequency for most taxpayers. Currently, AIL returns must be filed six-monthly if total AIL exceeds $500. This will change to annual filing if AIL is below $10,000. The AIL rules currently sit in the Stamp and Cheque Duties Act 1971 (SCDA). This Act once covered a range of levies and duties, all of which have been repealed except AIL. To make the rules easier to find, the SCDA will be repealed and the AIL rules moved to a new AIL-specific Act.

Charities and not-for-profits

The Tax Bill looks to resolve some areas of uncertainty for not-for-profits and also introduce new rules to allow donation tax credits to be received during the year and then be donated back to the charity being supported. Refer to our separate article for more details.

Cryptoassets

Two simplifications are coming for cryptoassets. First is the introduction of crypto-lending rules. Stablecoins will also become exempt from taxation on any gains/losses on disposals. Both of these rules will take effect from 1 April 2027.

Non-Resident Contractor Tax

Some useful simplifications are coming for NRCT, refer to our separate article for more details.

GST remedials

With GST about to have its 40^th birthday, it is fitting that the Bill proposes a raft of changes to ensure it remains fit for purpose. Changes include:

• Changing the treatment of excess solar power which is exported to the grid from residential properties
• Allowing non-residents who are primarily making supplies to non-residents to exclude these supplies when determining if the $60,000 GST registration threshold is exceeded
• Simplifying the rules that apply to goods and services acquired before someone becomes GST registered
• Making a range of minor corrections to the GST grouping rules
• Allowing the Commissioner to automatically change a person’s GST filing period from six-monthly to two-monthly once the relevant taxable supply threshold ($500,000) is exceeded
• Clarifying when a non-resident has a fixed or permanent place in New Zealand
• Making changes to taxable supply information rules to ensure that errors and inaccuracies are appropriately dealt with

Other remedials

The Bill contains a long list of remedial measures, including:

• Ensuring the rule allowing employers to choose whether to pay PAYE or FBT works as intended
• Removing the need for New Zealand members of a multinational subject to the Pillar Two rules to file top-up tax returns if there is no top-up tax to pay
• Ensuring that unsuccessful software projects involving Software as a Service (SaaS) qualify for the existing deduction rule
• Ensuring that ordinary and non-exclusive software licencing arrangements are not finance leases
• Aligning the loss limitation rule applying to look-through companies with the equivalent rule for limited partnerships
• A range of simplification measures for Māori authorities
• Allow shareholders to elect to have RWT withheld on dividends up to 39%, provided the payer also agrees
• Introducing a new definition of “not-for-profit organisation” to ensure that incorporated societies are eligible for rules designed for not-for-profits

Finally, it is worth noting that the Bill sets tax rates for the 2026/27 tax year. The Bill does not change any existing rates. However, as a quirk of tax law, tax rates must be confirmed by 31 March of the year to which they relate. This provides an incentive to ensure that the Bill completes the parliamentary process by 31 March 2027.

Where to from here?

The Bill has been introduced but must still go through the ordinary parliamentary process before enactment. This is complicated by the general election in November. Given that most changes are unlikely to be contentious and are generally taxpayer favourable and remedial, it seems plausible that the Bill will be reinstated and continue its legislative journey regardless of the election outcome. The election will leave the new Finance and Expenditure Committee with a compressed timeframe to consider submissions and recommend changes before the legislation returns to Parliament for enactment by 31 March 2027.

For more information about what the tax bill means for your business, please contact your usual Deloitte adviser.