Snapshot of recent developments

Tax legislation and policy announcements

Act commentary: Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025

On 9 May 2025, Inland Revenue published the Act commentary for the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025. It largely replicates the commentary for the Bill, with updates where changes have been made.

Policy consultation: Increasing certainty and preventing debt in the Working for Families schemes

As part of the Budget, Inland Revenue have issued new policy consultation on a set of proposals for improving Working for Families. The intention is to make Working for Families more accurate which would help prevent families from going into debt. One of the main proposals is to make improvements to the way Working for Families entitlements are calculated. This would involve switching from asking people to estimate their income for the year ahead, to instead calculating entitlements by using actual income earned and over a shorter period, such as a month.

Inland Revenue has also published:

• An information sheet, which summarises the full discussion document.
• A short set of summarised submission questions seeking feedback which focus on the topics of most interest to families receiving Working for Families.
• A set of answers to frequently asked questions about the proposals.
  

The closing date for submissions is 3 July 2025.

Discharge of Digital Services Tax Bill

On 20 May 2025, Minister of Revenue Hon Simon Watts announced that the Government had discharged (discontinued) the Digital Services Tax Bill from the legislative programme.

Inland Revenue Statements and Guidance

Inland Revenue: Public remedials log updated

The public remedials log has been updated for April 2025.

Inland Revenue: Public Guidance Work Programme (May 2025)

On 1 May 2025, Inland Revenue issued the updated Public Guidance work programme. The items that are expected to go to public consultation next are:

• PUB00478: Income tax – Business activity
• PUB00508: Income tax – PIE income from land activities
  

Tax Information Bulletin: May 2025

On 1 May 2025, Inland Revenue published TIB Vol 37, No 4 (May 2025), which covers:

New legislation

• GST on accommodation and transportation services supplied through online marketplaces
• SL 2024/240: Tax Administration (FamilyBoost Tax Credit—Extension of Dates to File Return of Income) Order 2024; SL 2025/8: Tax Administration (FamilyBoost Tax Credit—Extension of Dates to File Return of Income) Order 2025
• SL 2025/15: Tax Administration (Reportable Jurisdictions for Application of CRS Standard) Amendment Regulations 2025
  

Determinations

• AE 25/01: Participating jurisdictions for the CRS applied standard
• DET 25/01: GST on supplies through electronic marketplaces – hostel and motel opt-out agreement criteria
• FDR 2025/03: Determination the fair dividend rate may not be used to calculate FIF income by investors in Institutional Cash Series plc: BlackRock ICS US Dollar Liquidity Fund – Premier (Dis) Shares
• FDR 2025/04: Determination the fair dividend rate method may not be used to calculate FIF income by investors in Institutional Cash Series plc: BlackRock ICS US Treasury Fund – Premier (Dis) Shares
  

Rulings

• BR Prd 25/01: Taxi Limited
• BR Prd 25/02: Electric Bikes NZ Limited
  

Operational statements

• OS 25/01: Cash collateral is “money lent”
• OS 25/02: Valuation of livestock
  

Operational position

• OP 25/01: Commissioner’s operational position on the GST treatment of fees paid in relation to managed funds
  

Interpretation statements

• IS 25/05: GST treatment of fees paid in relation to managed funds
• IS 25/06: Employer obligations for employee share scheme benefits paid in cash
• IS 25/07: PAYE – How an employer funds the tax cost on an employee share scheme benefit
• IS 25/08: Income tax - implications of residential property moving between the standard tax rules and the mixed-use asset rules
• IS 25/09: Tax treatment of losses on amalgamation
• IS 25/10: Income tax and GST Amalgamations
• IS 25/11: Income tax – Partnerships (including limited partnerships) – general guidance
• IS 25/12: Income tax – Using the cost method to determine foreign investment fund (FIF) income
• IS 25/13: Income Tax and GST – forestry activities registered in the Emissions Trading Scheme
  

Questions we’ve been asked

• QB 25/01: Income tax – Which rules apply if I rent out my home, part of my home, or a separate dwelling on my property as short-stay accommodation?
• QB 25/02: Income tax – Which rules apply if I have a dwelling I sometimes rent out as short-stay accommodation and also sometimes use privately?
• QB 25/03: Income tax – How do the mixed-use asset rules apply if I provide short-stay accommodation?
• QB 25/04: Income tax – How do the standard tax rules apply if I provide short-stay accommodation?
• QB 25/05: Income tax – If property held in a trust is rented out for short-stay accommodation, who declares the income and what deductions can be claimed?
• QB 25/06: How does an amalgamated company calculate its available subscribed capital following an amalgamation?
  

Technical decision summary

• TDS 25/07: GST – Zero-rating, input tax deductions, shortfall penalties
  

Draft Interpretation Statement: Income tax - Whether money or property received by New Zealand tax residents from overseas is income from a foreign trust

On 5 May 2025, Inland Revenue published PUB00494: Income tax - Whether money or property received by New Zealand tax residents from overseas is income from a foreign trust and fact sheet. The Interpretation Statement considers the income tax treatment of amounts of money/property that New Zealand tax residents receive from a person overseas, including through inheritance. It addresses how to determine whether the person who transfers the money/property is a trustee of a trust and when the resident taxpayer has derived beneficiary income or a taxable distribution from a foreign trust. This will replace IS 19/04: Income tax – distributions from foreign trusts.

The deadline for comment is 19 June 2025.

Draft General Article: Tax on any fees paid to a member of a board, committee, panel, review group or task force

On 6 May 2025, Inland Revenue issued ED0259: Tax on any fees paid to a member of a board, committee, panel, review group or task force. This is an update of GA 21/01. How taxation applies to any fees paid to members depends on the personal circumstances of the individual member and the terms of their contract/appointment.

Inland Revenue: Update on Debit interest charging from terminal due date instead of provisional tax date/s issue

On 6 May 2025, Inland Revenue advised that they are still addressing the issue of debit interest being charged on provisional tax from the wrong due date. Inland Revenue are still analysing taxpayer data regarding other provisional tax issues. Inland Revenue plans to work out remediation and take any necessary actions by the end of May.

Inland Revenue: Baycorp pilot - clients of tax agents

On 6 May 2025, Inland Revenue provided an update on the debt recovery pilot. During the design phase, Inland Revenue excluded any clients of tax agents. However, an error meant that a small number of tax agent clients were included in the selection. Inland Revenue do not intend to include clients of tax agents in the future.

Inland Revenue: April 2025 meeting with tobacco industry representatives

On 7 May 2025, Inland Revenue advised that they had attended a meeting with representatives from the tobacco industry in April 2025. The World Health Organisation requires parties to be completely transparent when dealing with the tobacco industry. The purpose of the meeting was to discuss the illicit trade of tobacco in NZ. Along with Inland Revenue officials, the meeting was attended by representatives from Imperial Tobacco and British American Tobacco.

Questions we’ve been asked: Land sale rules

On 9 May 2025, Inland Revenue issued seven updated Questions We’ve Been Asked on the land sale rules, primarily to reflect changes to the bright-line test for disposals of residential land. They have also been updated for formatting, plain English and consistency.

The main changes relate to the bright-line test having reverted to being a 2-year test. There are also updates to reflect changes to other settings around the bright-line test, such as the main home exclusion, rollover relief and terminology in the legislation.

• QB 25/08: When is land acquired for a purpose or with an intention of disposal so that the amount derived from the sale is income?
• QB 25/09: When do I have a “regular pattern” of transactions that prevents me from using exclusions from the land sale rules for my residence or for my main home?
• QB 25/10: On what date is a person treated as acquiring land for the purposes of the land sale rules?
• QB 25/11: When is the bright-line start date for the 2-year bright-line test?
• QB 25/12: How does the bright-line test apply to the sale of a subdivided section?
• QB 25/13: When is the sale of a lifestyle block excluded from the bright-line test?
• QB 25/14: When does the business premises exclusion to the bright-line test apply?
  
  

Questions we’ve been asked: How do the bright-line rollover relief provisions apply to transfers of residential land between associated persons?

On 9 May 2025, Inland Revenue issued QB 25/15: How do the bright-line rollover relief provisions apply to transfers of residential land between associated persons? It explains how the bright-line test and rollover relief provisions apply to transfers of residential land between associated persons on or after 1 July 2024. It considers the effect of rollover relief and sets out the criteria that need to be met for rollover relief to apply. This Questions We’ve Been Asked may be relevant in a wide range of situations as the rollover relief provisions can apply even if the bright-line test does not apply to the transferor.

Inland Revenue: Compliance activity uncovers $150m undeclared tax

On 9 May 2025, Inland Revenue announced they have uncovered more than $150 million in undeclared income tax and GST from the property sector. The $153.5 million discrepancy for the first nine months of the current financial year is almost the same as the discrepancies for the whole of the 2023-2024 financial year.

Inland Revenue: 5th anniversary of the Small Business Cashflow loans – time to repay

On 12 May 2025, Inland Revenue advised that it was the 5th anniversary of the Small Business Cashflow (Loan) Scheme, and all loans should now be repaid. More than 129,000 businesses were issued loans totalling $2.4 billion. The average amount approved was $17,000. From June, Inland Revenue will default a loan if it has not been paid off. Default interest (calculated based on use of money interest of 10.88% plus standard interest rate of 3%) will be charged.

Interpretation Statement: Look-through companies and disposal of residential land under the bright-line test

On 12 May 2025, Inland Revenue published Interpretation Statement 25/15: Look-through companies and disposal of residential land under the bright-line test and fact sheet. The Interpretation Statement explains how the bright-line rules (including the main home exclusion and rollover relief) apply in different situations involving residential land and transfers involving a look-through company.

Inland Revenue: Depreciation overview

Inland Revenue has published a new depreciation overview page on the tax technical website. The overview is organised by the following subjects:

• Depreciation determinations
• General principles
• Residential rental property chattels
• Buildings
• Other assets
• Estimated useful life
• Change of use event where a business becomes a charity

Inland Revenue: Overseas-based Student Loan borrowers' repayment increases

On 13 May 2025, Inland Revenue announced it has collected more than $207 million in repayments since July last year from student loan borrowers living overseas – a 43% increase on the same period the previous year. Much of this can be attributed to an increase in student loan compliance funding in last year’s budget.

Inland Revenue: GST registrations for non-active companies

On 14 May 2025, Inland Revenue announced it is no longer going to automatically reject GST registrations for non-active companies. Instead they will send a web message asking that you click ‘reply’ and attach a copy of the IR434 – Non-active company reactivation form. There's a link to this form in the web message. You'll have 20 working days to respond to this web message.

When Inland Revenue get the IR434 they will complete the company reactivation and the GST registration at the same time.

When Inland Revenue get a request for back-dated GST registration, Inland Revenue will also send a web message asking for evidence to prove that there has been business activity.

Inland Revenue: GST listed services rules

On 15 May 2025, Inland Revenue published two draft Questions We’ve Been Asked on GST listed services rules:

• PUB00496: GST listed services rules: When is a supply of listed services made through an electronic market?
  • This Questions We’ve Been Asked discusses one of the key requirements for when the GST listed services rules apply. That is, the supply must be made by an underlying supplier to a recipient through an electronic marketplace operator. It explains that this requirement is satisfied when the marketplace is involved in, and facilitates, supplies between underlying suppliers and recipients.
• PUB00496: GST listed services rules: How do the rules apply when there is a supply of listed services and other goods or services?
  • This Questions We’ve Been Asked discusses some issues with identifying the relevant supplies for the GST listed services rules. It explains what listed services are and how to apply the GST listed services rules if a supply includes listed services with other goods or services.

Submissions close on 27 June 2025.

Inland Revenue: Taxation of transfers from overseas pension schemes

On 15 May 2025, Inland Revenue reminded that from 1 April 2026 a person transferring their overseas pension fund to certain New Zealand superannuation schemes can elect to have the scheme pay the tax due on the transfer on their behalf. More information can be found in the Bill Commentary from the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill. Inland Revenue said more information will be made available on its website leading up to 1 April 2026.

Inland Revenue: Two-step verification update

On 20 May 2025, Inland Revenue issued a couple of reminders in regard to two-step verification (2SV) becoming compulsory for tax agents and intermediaries.

Questions We’ve Been Asked: How do the income tax rules apply when a close company provides short-stay accommodation?

On 23 May 2025, Inland Revenue issued QB 25/16: Income tax – How do the income tax rules apply when a close company provides short-stay accommodation? It explains that the income tax consequences for a close company that provides short-stay accommodation depend on whether the mixed-use asset rules or the standard tax rules apply.

There are also income tax consequences for shareholders or employees who have use of the dwelling without paying market rent. Shareholders are treated as receiving non-cash dividends and employees (including shareholder-employees) are treated as receiving employment income.

Technical Decision Summary: Distribution and resettlement of trusts (private ruling)

On 30 April 2025, Inland Revenue issued TDS 25/09: Distribution and resettlement of trusts. The Tax Counsel Office considered an arrangement involving the distribution and resettlement of assets from several family trusts on to new family trusts. It confirmed the income tax treatment of various elements of the arrangement.

Technical Decision Summary: Source of income and foreign tax credits (adjudication)

On 1 May 2025, Inland Revenue issued TDS 25/10: Source of income and foreign tax credits. The dispute two individual taxpayers who were shareholder employees and directors of a New Zealand registered company that provided services in New Zealand. The issue was whether the shareholder employee’s salary had a New Zealand source. The Tax Counsel Office determined there was a New Zealand source and there was no entitlement to foreign tax credits as the shareholder employees were not tax resident when the income was derived.

Technical Decision Summary: Deductions, zero-rating and shortfall penalties

On 8 May 2025, Inland Revenue issued TDS 25/11: Deductions, zero-rating and shortfall penalties. It concerned a company registered for GST on a payments basis that purchased a business from another company with the same shareholder and directors. Amongst other issues, it was concluded that the taxpayer was entitled to an input tax deduction for the purchase (though not all of the subsequent input tax deductions were valid) and an income tax deduction could not be claimed for the purchase of the business.

Technical Decision Summary: Deductions and shortfall penalties

On 8 May 2025, Inland Revenue issued TDS 25/12: Deductions and shortfall penalties. It dealt with a similar issue to TDS 25/12. It resulted in the taxpayer being liable for gross carelessness shortfall penalties.

Technical Decision Summary: Income tax – land transferred within a consolidated group (ruling)

On 19 May 2025, Inland Revenue published TDS 25/13: Income tax – land transferred within a consolidated tax group. It concerned a holding company, part of a consolidated company that included an active company selling land. The holding company was to be liquidated and the issue concerned intragroup transactions. The Tax Counsel Office concluded that the sale proceeds were not taxable, sections FC 1 and FC did not apply, and section BG 1 did not apply.

OECD Updates

OECD release Taxing Wages 2025

On 30 April 2025, the OECD published Taxing Wages 2025. The Tax Wedge for the average single worker in New Zealand (% of total labour cost) for a New Zealand worker was amongst the lowest at 20.78%.

Common errors made by Multinational Enterprise groups in preparing Country-by-Country reports

The OECD have issued an updated version of its common errors made by Multinational Enterprise groups in preparing Country-by-Country reports.

Report on Tax Incentives Principles released

The Platform for Collaboration on Tax, a joint initiative between the IMF, the OECD, the World Bank Group and the UN, released a new report on Tax Incentives Principles. The document is the result of a public consultation opened in February 2025 and lists a series of guiding principles for policymakers to design tax incentives in a way that maximises their benefits while minimising risks to revenue, fairness, and governance.

Updated Transfer Pricing Country Profiles

On 22 May 2025, the OECD has published updated transfer pricing country profiles reflecting the current transfer pricing legislations and practices of 11 jurisdictions and issued for the first time the profiles of Azerbaijan and Pakistan. These latest country profiles present country-specific information on the transfer pricing treatment of hard-to-value intangibles and the simplified and streamlined approach for baseline marketing and distribution activities.

Note: The items covered here include only those items not covered in other articles in this issue of Tax Alert.