Tax and Social Policy Work Programme – remixed and remastered

By Joe Sothcott & Robyn Walker

At an event held at Deloitte’s Wellington offices in late October, the Minister of Revenue, Hon Simon Watts, unveiled the Government’s refreshed Tax and Social Policy Work Programme.

The Work Programme sets out the Government’s tax policy priorities for the next 12–18 months. When the previous Work Programme was launched last year, Minister Watts indicated it would be refreshed periodically—allowing completed items to drop off and new priorities to be added. This marks the first such refresh.

The main change from last year’s work programme is the number of workstreams has been streamlined from six to four:

• Attracting and retaining capital and talent
• Supporting small businesses
• Simplification and integrity of the tax system
• Improving social policy

Much of the content reflects ongoing initiatives carried over from the previous programme or items currently progressing through Parliament via the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill. Nonetheless, several newly introduced items stand out and merit closer examination.

FIF stage 2

The Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill introduces the Revenue Account Method (RAM) into the Foreign Investment Fund (FIF) rules. While the initial impact is expected to be limited—applying only to recent migrants and unlisted shares—FIF Stage 2 could broaden access to RAM and may include a review of other parts of the FIF regime, such as the current $50,000 de minimis threshold.

Review the impact of the Financial Arrangement Rules on new migrants

Another welcome addition is the review of how financial arrangement rules affect new migrants. These rules can result in tax on deemed income (such as unrealised exchange rate movements), where tax is charged despite no corresponding cash flow—creating liquidity challenges for those newly arrived in New Zealand.

Simplify Fringe Benefit Tax

Although not new, the Government’s renewed commitment to simplifying Fringe Benefit Tax (FBT) is notable. This follows the decision earlier this year not to proceed with proposed reforms in the current Bill. The inclusion signals that FBT reform remains on the agenda.

Consulting on GST issues

While the Work Programme notes that GST amendments are included in the current Bill, they are relatively minor and uncontroversial. Continued inclusion on the Work Programme may pave the way for a broader review of GST rules to address more complex or outdated aspects of the regime.

Reviewing the tax treatment of expenditure on flood damage and land improvements

This item appears to have emerged from a Tax Counsel Office review of the tax treatment of expenditure related to flood damage and land improvements. It may be subject to public consultation in the near future.

Progressing the transition to digital tax administration for tax intermediaries

Presumably stemming from the 2022 Tax Administration in a Digital World issues paper, this initiative will likely explore how the tax system can better support digital tax intermediaries, making it easier to participate as business models evolve.

Reviewing software expenditure by business on Software as a Service customisation and configuration

Split from the broader review of software development expenditure, this item will likely address the mismatch between tax and accounting treatment of Software as a Service (SaaS) customisation and configuration costs.

Reviewing the tax treatment of interest allocation for bank branches

Inland Revenue is reviewing how capital and funding is allocated to foreign bank branches operating in New Zealand.

Other items

• Review of elements of the charities and not-for-profits regime: The review continues, with the Government now focusing on charities controlled by a single donor. The Minister announced that no changes are planned for the treatment of business income, though increased compliance activity is expected.
• Thin capitalisation for infrastructure: Further consultation on this has been confirmed, with changes potentially being included as an Amendment Paper to the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill.
• Digital economy and International Tax Cooperation: Now includes reference to the UN Framework Convention on International Tax Cooperation, alongside OECD’s Pillar One and Two.
• Māori authorities: Work will begin to simplify tax compliance.
• NZ Super Fund Tax Exemption review: This item has been dropped from the Work Programme, indicating the review has been completed.

Looking ahead

With the next election fast approaching, it remains to be seen how much of the refreshed Work Programme the Government can progress in the time remaining.

Future editions of Tax Alert will continue to keep you informed on the latest tax policy developments. For more information, please contact your usual Deloitte advisor.