Tax Bill 2026: key proposed changes and implications

The Taxation (Annual Rates for 2026–27, FBT Simplification, Foreign Investment Funds, and Remedial Measures) Bill (the Bill) was introduced to Parliament on 10 September 2026. The Bill gives legislative form to many of the tax initiatives announced at Budget 2026, as well as a raft of others that have been telegraphed and consulted on in recent periods.

The Bill presents reforms and remedials across a number of areas, most of which have been well signalled by the Government previously. These include the long-awaited Fringe Benefits Tax (FBT) simplification, changes to the Foreign Investment Fund (FIF) and Financial Arrangement (FA) rules to make them more workable, and simplification of tax settings for not for profit (NFP) organisations, research and development (R&D), Non Resident Contractors Tax (NRCT) and the Approved Issuer Levy (AIL) regime. Further, there are targeted integrity measures for banks and exempt entities, new rules for cryptoassets, changes to New Zealand’s Pillar 2 filing settings, a number of GST amendments and remedials, and a new statutory framework for Inland Revenue’s use of automated decision making (ADM).

Consistent with the Government’s Tax and Social Policy Work Programme over this term, the package of proposed changes seeks to reduce compliance costs and tax friction where the revenue or integrity risk is low. The practical question, as always, is whether the detailed design preserves that balance without creating new complexity.

The election will interrupt the Bill’s progress. It will lapse when Parliament is dissolved on 1st October and will need to be reinstated by the next Parliament. This leaves a relatively tight timetable for the Bill to complete the parliamentary process. Given that many of the proposals are directed at reducing compliance costs and improving the workability of the tax rules, we would welcome the Bill being picked up promptly after the election, with a view to enactment before 31 March 2027 — particularly as the Bill also sets the annual income tax rates for the 2026–27 tax year.

We summarise the key proposals and our initial views below.

The Bill contains a significant simplification of the motor vehicle FBT rules, following consultation in early 2025. From 1 April 2027, the current approach of counting the days a vehicle is available for private use would be replaced with a category-based method. Employers would select one of six categories based principally on the expected level of private use and the extent to which the vehicle is used for business purposes. The prescribed private use percentages range from 100% for a vehicle used mainly for private purposes to zero for qualifying business use vehicles and pool vehicles with no private use.

The category-based approach is deliberately approximate. Inland Revenue describes it as a “close enough is good enough” model under which a vehicle should generally be classified upfront based on the expected use and is revisited only if there is a material change in circumstances. If no category applies, the default is the 100% private use category. Other key features of the proposed motor vehicle FBT reforms include:

• Categories 2, 4 and 5 (motor vehicles used mainly for business use, excluding use mainly on farmland) would generally require permanent branding, subject to a transitional concession for vehicles purchased or leased before introduction of the Bill, an exception for certain farming or agricultural businesses, and Commissioner discretion where branding is not appropriate.
• The existing work-related vehicle exemption, emergency call exemption, and business travel exemption would be removed because the relevant use is intended to be reflected within the new categories. A separate exemption would apply to specified emergency vehicles.
• The motor vehicle weight exclusion would increase from 3,500 kilograms to 6,000 kilograms, reflecting the greater weight of modern vehicles, particularly electric vehicles.
• Vehicle valuation would also change. Employers could continue to use either the cost price or tax value basis, but the application of the existing rates would be updated to reflect vehicle fuel type, with new rates for hybrids and electric vehicles. On the cost price basis, the annual amount would be 20% for petrol and diesel vehicles, 19.6% for hybrids, and 17% for electric vehicles. Corresponding tax value rates would also apply, with the rates varying by fuel type and whether Investment Boost has been claimed. The rates would be reviewed every four years using external vehicle cost and fuel data.

PwC view

We support the direction of the reform. Employers have been asking for a system that removes the need for detailed day counting and this reform better aligns FBT compliance effort with the amount of tax at stake. The category approach should provide a more practical framework for assessing motor vehicle FBT and will ease administration for businesses, likely resulting in more consistent compliance. However, “close enough is good enough” should not mean “set and forget” without appropriate governance. 

The success of the simplification will be dependent on the new rules remaining straight forward to apply. Clear guidance on what constitutes a material change in expected private use and how the incidental use concept operates will ensure employers can support a reasonable category selection without the administrative burden that the current rules impose.

The Bill gives effect and further extends the FIF reforms that have developed over the past two years. Most of the changes would apply from 1 April 2026 and are aimed largely at reducing cashflow and compliance problems for New Zealand residents holding foreign investments.

The most significant change is wider access to the revenue account method (RAM), which was enacted last year and discussed in our corresponding Tax Tips. The method, which was initially introduced for recent migrants and returning New Zealanders, would be available to all New Zealand resident natural persons and eligible trustees for qualifying unlisted foreign shares. Under RAM, actual dividends and 70% of a realised gain on disposal is treated as FIF income. Similarly, 70% of a realised loss will result in FIF loss but that loss can only be carried forward against future RAM gains. All eligible persons would also have greater flexibility to elect into and out of RAM, subject to a five-year consistency rule.

Residents who are concurrently taxed in another country because of their citizenship or right to work there would have wider access to the extended RAM for both listed and unlisted foreign shares.

Other key features of the proposed FIF rules include:

• The FIF de minimis threshold would increase from $50,000 to $100,000 of cost, reducing the number of smaller investors required to use the FIF rules.
• The attributable FIF income (AFI) method would be extended to certain active investors who previously met the 10% ownership threshold, but whose interest is subsequently diluted below 10%, provided the relevant active investor requirements continue to be met.
• The existing 10-year exemption for New Zealand shareholders following an offshore acquisition and listing would be modernised so that corporate reorganisations associated with the listing do not break continuity.
• Individuals with indirect FIF interests through a controlled foreign company (CFC) would be able to calculate FIF income using methods available to them as if the FIF interests were held directly.
• Taxpayers would be able to use the cost method for FIF interests without a readily available market value while retaining the choice to use the fair dividend rate or comparative value for interests with a readily available market value.
• From 1 April 2027, the RAM exit tax would also apply where a person remains New Zealand resident under domestic law but is treated under a double tax agreement as not resident in New Zealand. A deemed disposal would occur immediately before the person tie-breaks out. The liability would generally become payable if the interests are disposed of within three years. If New Zealand’s taxing rights are re-established while the interests are still held, or the interests are retained beyond the three-year period, the deemed disposal would effectively cease to give rise to a payable liability.

PwC view

We welcome the broader direction of the FIF reforms. We have previously supported wider access to RAM and continued access to the AFI method for active investors whose interests are diluted. We also support greater flexibility to move into and out of RAM, and the ability to use the cost method for FIF interests without a readily available market value while applying FDR or CV to other interests.

RAM should be viewed as an alternative FIF calculation method rather than a general concession. Its key benefit is that it can better align tax with cashflow by taxing actual dividends and realised gains rather than deemed annual income. However, depending on the taxpayer’s circumstances and investment profile, another FIF method may be preferable, particularly given the five-year consistency rules that apply once RAM is chosen.

The amendments to the FA rules are aimed primarily at reducing tax volatility, compliance costs, and cash flow uncertainty associated with foreign exchange movements. The current rules can bring unrealised foreign exchange gains and losses into taxable income even where the taxpayer has not received cash. The Bill would introduce a number of changes, if enacted, would generally apply from 1 April 2027:

• Natural persons, together with certain family-held entities and trusts, would be able to elect to use a functional currency when calculating income and expenditure for eligible foreign currency FAs. This is intended to reduce the impact of exchange-rate movements on FA calculations.
• Certain New Zealand resident individuals who are taxed in another jurisdiction because of citizenship or a right to work there (primarily the United States) would be able to use a cashflow basis for qualifying “quarantined foreign FAs”, reducing the risk of double taxation caused by differences in timing between New Zealand and the other jurisdiction.
• A number of low-risk personal arrangements would be taken outside the FA rules or have existing exclusions broadened. This includes certain offshore foreign-currency transaction accounts used predominantly for private or domestic purposes, together with changes to reduce the impact of exchange-rate movements when applying the threshold for variable-principal debt instruments such as credit cards and revolving credit accounts.
• Financial arrangements acquired to satisfy Active Investor Plus Visa requirements would no longer be subject to the existing revaluation rule when the investor enters the FA rules. Instead, the arrangement would be valued by reference to when it was actually acquired. This change would apply retrospectively from 1 April 2025.

In addition, the threshold for using the straight-line method would increase from $1.85 million to $3 million. Other remedials address deceased estates, CFC financial arrangements and debt-for-equity swaps.

PwC view

We welcome the direction of the amendments. We expect the changes to reduce tax volatility and compliance costs for taxpayers with foreign currency FAs, while also addressing potential double taxation issues for individuals who remain subject to tax overseas. This is consistent with the broader policy direction of simplifying compliance and reducing tax barriers to attracting and retaining internationally mobile talent.

The Bill provides considerably more detail than was available when the measures were announced at Budget 2026. As the rules are implemented, clear guidance on the eligibility requirements, elections, and transitional adjustments will remain important to ensure the new rules operate as intended.

The Bill brings together several measures affecting taxable NFP organisations and charities. The overall package combines simplification for smaller organisations with more targeted integrity rules for tax exempt entities.

• Membership subscriptions, fees and levies received by qualifying NFPs, including incorporated societies and other organisations prohibited from distributing to members, would be expressly exempt, subject to limited exemptions.
• The statutory deduction would increase from $1,000 to a maximum of $10,000 from the 2027–28 income year. The deduction would only be available where net income before the deduction is $10,000 or less, effectively creating a $10,000 tax-free threshold on a cliff-edge basis. NFPs with net income above $10,000 would not be entitled to the deduction.
• NFP organisations with net income of $10,000 or less before the statutory deduction would generally not need to file an income tax return, unless requested to do so by Inland Revenue. From 1 April 2028, banks and other interest payers would also be required to report investment income information for customers that are exempt from RWT, helping Inland Revenue retain visibility where smaller NFPs are no longer required to file returns.
• From 1 April 2028, NFPs could elect to treat volunteer honoraria as salary or wages subject to the PAYE rules rather than schedular payments.
• The income tax exemption for certain non-resident charities earning New Zealand-sourced non-business income would be repealed from 1 April 2028 where the charity is not registered under the Charities Act and is not established in, or strongly connected to, New Zealand.
• From the 2028–29 income year, beneficiary income allocated by a trust to a tax-exempt beneficiary would need to be paid into an account held by that beneficiary with a registered bank or licensed non-bank deposit taker within the required timeframe. Otherwise, the amount would be treated as trustee income for relevant purposes and taxed at 39%.

PwC view

The amendments addressing the treatment of membership subscriptions and levies are welcome, as they should remove uncertainty around the application of the mutuality principle. Increasing the statutory deduction and filing threshold should also reduce compliance costs for smaller organisations where the amount of tax at stake is low.

The $10,000 threshold will, however, create a cliff-edge effect, as an NFP with net income above that level will lose access to the statutory deduction entirely. The policy intention also appears to be that NFPs should not be able to fragment their activities across associated entities or branches simply to multiply the benefit of the deduction.

The Bill adds two administrative changes to the DTC regime from 1 April 2028, previously announced as part of Budget 2026. These sit alongside the maximum donation entitlement introduced from 1 April 2027, which is generally the lower of $100,000 and the donor’s taxable income.

• Individual donors would be able to receive DTC refunds during the year rather than waiting until after year end. In-year refunds would be limited by the donor’s reportable income earned to the date of the claim and the overall $100,000 donation limit. Donors with only non-reportable income would continue to receive their DTC refunds after year end.
• Donors could choose to redirect their DTC refund directly to the donee organisation, effectively allowing the tax credit to increase the amount received by the charity. A redirected refund would not itself qualify for a further DTC.

PwC view

We welcome both changes. Providing the credit closer to the time of the donation should make the concession more visible and useful to donors, while the ability to redirect the refund to the charity provides a simple way for donors to increase the amount ultimately received by the organisation. The practical success of the changes will depend on the claims and redirection process being simple and easy for donors to use

As part of the Government’s work to simplify tax compliance for MAs, the Bill proposes a number of amendments to the MA rules. These include:

• Setting a cost base for redress assets received under a Treaty of Waitangi settlement. The assets would have a cost for tax purposes equal to their market value when received by the settlement entity or other nominated recipient. The amendment does not itself make the receipt of the redress taxable. 
• Confirming that MAs can use tax pooling on the same basis as other taxpayers that satisfy the relevant statutory requirements. The Bill also introduces rules governing Māori authority tax credits for tax pooling purposes, together with a savings provision validating earlier tax pooling transactions.
• Clarifying the value of a MA distribution arising from a low- or no-interest loan to a member. Broadly, the taxable benefit would be the difference between benchmark interest and the interest actually paid. Benchmark interest would be calculated using the market rate where that can be determined, or otherwise the prescribed rate, currently 5.77%.
• Clarifying the treatment of taxable bonus issues by bringing them directly within the definition of a taxable MA distribution.

The Bill also contains a number of technical and drafting amendments, including expressly ensuring that a Māori incorporation acting as trustee can fall within the definition of a “company” for the MA rules, correcting terminology and cross-references, and consistently using the spelling “Māori” with the macron.

PwC view

We welcome the changes above. The explicit confirmation that tax pooling is available to MAs should provide greater certainty and may encourage more MAs to use tax pooling to manage provisional tax obligations and associated use-of-money interest exposure. The other clarifications should also improve the coherence and practical operation of the Māori authority rules.

The Bill proposes a substantial package of RDTI changes, which were previously announced as part of Budget 2026. The package combines cashflow support and administrative flexibility with a material restriction on internal software claims.

• From the 2027-28 income year, businesses approved for the in-year payment regime could elect to receive advance RDTI payments after each quarter based on eligible expenditure already incurred. Each payment would be limited to the lesser of the 15% credit rate, labour related taxes paid, and an amount approved by the Commissioner. Total payments for the year would generally be capped at 80% of the expected annual credit based on approved estimated eligible R&D expenditure.
• The advance payments would be washed-up against the final RDTI claim. Any excess would be repayable as tax and use of money interest (UOMI) debit would apply from the day after cumulative payments first exceed the final RDTI entitlement.
• From 1 April 2027, the Commissioner would have discretion to accept certain late RDTI filings or allow amendments where the taxpayer took reasonable steps to participate and the failure arose from a genuine mistake, oversight or event outside the taxpayer’s control. The general four-year time bar would continue to apply.
• The range of eligible mining expenditure would be expanded from the 2027–28 income year so mining businesses are treated more consistently with other industries. Prospecting, exploration and drilling activities, and relevant upfront capital asset costs, would remain excluded.
• The annual cap for eligible non-administrative internal software development expenditure would reduce from $25 million to $3 million from the 2027–28 income year. The cap would continue to apply on a group basis by aggregating expenditure incurred by associated persons. Software developed for sale or license to external customers is not subject to that internal software cap.
• A separate amendment, effective the day after Royal assent, would allow partners that use the partnership’s balance date for returning their share of partnership income and deductions to use the same period for relevant RDTI reporting on R&D conducted through the partnership. This should reduce mismatches between income tax and RDTI reporting periods.

PwC view

The in-year payment and administrative flexibility measures build on the direction outlined in our Budget 2026 Tax Tips and should help address some of the cashflow and compliance challenges experienced by RDTI claimants. Advance payments and a discretion for genuine filing mistakes should reduce outcomes where otherwise eligible R&D is denied or delayed for reasons unrelated to the quality of the R&D activity.

A pragmatic and risk-based approach to administration remains critical, particularly given the compliance costs and commercial impact of detailed reviews and approval delays. While these operational matters are not directly addressed by the Bill, these considerations will remain important as the new measures are implemented.

The reduction of the internal software cap is a clear trade off. The policy rationale appears to be value-for-money and integrity, but the change will be material for a smaller group of large claimants. It should be monitored to ensure it does not discourage genuine high-value R&D solely because it is undertaken for internal use, rather than sale or licences to external customers.

The Bill makes targeted administrative changes to New Zealand’s Pillar Two rules. The amendments do not materially alter the substantive 15% minimum tax framework. Their key focus is reducing unnecessary filing.

• A New Zealand inbound entity that is subject to the Pillar Two rules but has no top up tax liability would no longer need to file a separate “Multinational Top-up Tax” return. The group’s GloBE information return would instead be treated as the assessment for that entity, with the statute time bar running from the date that return is filed.
• Where New Zealand entities have top up tax liabilities, one designated filing entity will be able to file a single multinational top up tax return on behalf of all relevant New Zealand group entities.

These two filing changes would apply from 1 January 2025, aligning with commencement of New Zealand’s GloBE rules.

PwC view

In our view, the changes are sensible compliance simplifications. Requiring each New Zealand entity to file a separate return where there is no top up tax liability, or requiring multiple New Zealand returns for the same group liability, creates duplication without an obvious integrity benefit.

The Bill proposes to modernise the NRCT rules from 1 April 2027, reducing withholding and compliance costs where the risk of a non-resident leaving New Zealand without meeting its tax obligations is low.

• The monetary exemption threshold would increase from $15,000 to $75,000 for payments under a contract in a 12-month period, a threshold which had not been increased since its introduction in 2003.
• Both the $75,000 monetary threshold and the 92-day threshold would apply on a single-payer basis. A New Zealand payer would therefore consider only its own contractual activity with the contractor, rather than needing information about the contractor’s unrelated New Zealand engagements.
• Certain branches, limited partnerships and representative offices would be excluded where the contractor has an IRD or GST number and has been registered with the Companies Office for at least 24 months before the relevant payment. The payer would need to retain evidence supporting the decision not to withhold.

PwC view

We welcome the changes. The higher threshold and single-payer approach should materially reduce compliance costs and remove the need for payers to obtain information about a contractor’s other New Zealand engagements simply to determine whether withholding is required.

The low-risk entity exclusion is also a sensible move towards objective compliance indicators. Clear guidance on what evidence payers should retain, including where the 24-month condition is met part-way through a contract, will be important.

The Bill contains a substantial package of GST amendments, many of which build on Inland Revenue’s May 2026 Current GST Issues consultation, covered in our earlier Tax Tips. The changes span cross-border, registration, error-correction and other technical issues.

Cross border registration and residence

A non-resident supplier would not be treated as having a fixed or permanent place in New Zealand merely because it uses premises made available by a GST-registered customer to make supplies to that customer, provided the statutory conditions are met. This would apply from the day after Royal assent.

The Bill would also allow certain non-residents supplying qualifying zero-rated services to non-resident customers to ignore those supplies when determining whether the $60,000 GST registration threshold is exceeded. The supplier could still choose to register where it wishes to recover New Zealand input tax.

Pre-registration expenditure

From 1 April 2027, a new rule would allow GST deductions for qualifying goods and services acquired before registration when they subsequently begin to be used to make taxable supplies. The deduction would generally be capped at the lower of the GST that would have been deductible when the goods or services were acquired and the tax fraction of their open market value when taxable use begins.

A 12-month safe harbour would generally allow the purchase price to be used without determining open market value where the goods or services begin to be used for taxable supplies within 12 months of acquisition. Additional rules would deal with re-registration, pre-incorporation expenditure, partnerships and flow-through joint ventures

Correcting errors and inaccuracies

The Bill proposes a clearer and more consolidated framework for correcting GST errors and inaccuracies. Broadly, an error arises where the GST position was incorrect when originally taken, while an inaccuracy arises where a later event or agreement means an originally correct GST treatment is no longer appropriate.

The new framework would retain a simplified method for correcting eligible lower-value errors and clarify when a correction can be made in the GST return for the discovery period and when the original assessment must instead be amended. The small-value threshold would be capped at $10,000.

Other GST changes

• Supplies of surplus electricity generated at residential premises and sold to electricity retailers would be zero rated from 1 April 2027.
• GST grouping rules would be amended to restore optional treatment of certain intra group supplies and give the Commissioner flexibility to allow a company to join or leave a GST group part way through a taxable period.
• Other remedials address six monthly filing, interests in unincorporated bodies, incorrect zero rating of land and related technical matters.

PwC view

We broadly welcome the GST amendments. The cross-border changes should reduce unnecessary compliance where there is little or no revenue at stake, while the consolidated error-correction framework should improve clarity. We also welcome retention of the “clear mistake or simple oversight” ground for late input tax deductions.

The pre-registration rules are more workable with the 12-month safe harbour, although they remain more complex than a simple restoration of the previous position. We would also welcome further work on issues not progressed in the Bill, including transitional housing.

The Bill would simplify and modernise the AIL regime, including by repealing the Stamp and Cheque Duties Act 1971 and moving the remaining AIL rules into a standalone Approved Issuer Levy Act. The core regime, including the 2% levy rate, would remain unchanged.

Key changes include:

• From 1 April 2027, borrowers with annual AIL liability below $10,000 would file annually rather than monthly or six-monthly. The current reduced-filing threshold is only $500.
• For securities registered on or after 1 October 2027, Inland Revenue could deregister a security where AIL for two consecutive tax years remains unpaid, the borrower and lender have been notified, and the position remains unresolved for at least six months.  Following deregistration, future interest payments would fall back into the NRWT rules unless and until the security is re-registered.
• The new AIL Act would commence on 1 April 2027. The move to a standalone Act is intended to improve accessibility without changing the substantive operation of the regime.

PwC view

We welcome the filing simplifications, which should materially reduce compliance costs for smaller AIL borrowers. We also support the more prescriptive deregistration rules. Requiring two years of unpaid AIL, notice to both borrower and lender, and a six-month opportunity to remedy the position provides a clearer and more proportionate integrity response.

There may still be scope to simplify the regime further. In particular, a self-assessment model could remove the need to apply for approved issuer status and separately register securities, bringing AIL more closely into line with the wider tax system.

The Bill would increase the thin capitalisation thresholds for foreign-owned banking groups, as previously signalled at Budget 2026. The change is intended to align the tax settings more closely with the Reserve Bank’s prudential capital requirements and limit the ability to introduce additional debt through holding companies or branches without affecting prudential capital at the registered bank level.

• For measurement periods beginning on or after 1 April 2027, the threshold would increase from 6% to 12% where the New Zealand banking group includes a domestic systemically important bank, and to 11% for other foreign-owned banking groups.
• For periods beginning on or after 2 December 2028, those thresholds would automatically adjust by the same percentage-point movement as the Reserve Bank’s countercyclical capital buffer. The existing 6% threshold would remain for New Zealand-owned banks with outbound investments.

PwC view

This is a targeted base-protection measure that will require affected foreign-owned banking groups to hold a higher level of equity for thin capitalisation purposes, reducing the scope to introduce additional debt that generates New Zealand interest deductions. Affected groups should assess the impact on their funding structures and interest deductions ahead of 1 April 2027, and ensure future changes to the Reserve Bank’s countercyclical capital buffer are reflected in their calculations.

The Bill introduces two targeted cryptoasset simplifications from 1 April 2027, aimed at removing artificial taxing points and reducing compliance costs without creating a broader exemption for speculative cryptoasset gains.

• A new cryptoasset-lending regime, modelled on the existing share-lending rules, would preserve the original cost base where cryptoassets are temporarily transferred under a qualifying arrangement and the original or an identical cryptoasset is returned. This is intended to prevent an interim gain or loss where there has been no material change in the taxpayer’s economic position.
• A narrow exemption would apply to qualifying cryptocurrencies designed to maintain a stable value by reference to a fiat currency and acquired within 2% of that reference value. Income that would otherwise arise solely under section CB 4 would be exempt, while other charging provisions would continue to apply.

PwC view

Preserving the cost base for qualifying lending arrangements should reduce tax friction where there is no material change in economic ownership, while the qualifying cryptocurrency exemption should make it easier to use these assets for payments or as a store of value without changing the tax treatment of more speculative activity.

Given the range of smart contracts, pools and tokenised arrangements in the market, clear guidance on the boundaries of the cryptoasset-lending rules will be important.

The Bill would give the Commissioner explicit authority to use automated decision-making for tax and social policy administration from the day after Royal assent. The framework is intended to support high-volume, rules-based processes while providing legislative certainty for existing and future use of automated systems.

The authority is accompanied by a requirement for Inland Revenue to develop and publish an approved operational standard. The Privacy Commissioner and Human Rights Commission would be consulted on the approval of the standard, and the standard would need to be reviewed at least every three years.

• The standard must address matters including accuracy and reliability, neutrality and non-discrimination, transparency, monitoring, accountability, and appropriate customer contact channels.
• ADM under the proposed policy is intended to apply to systems that make or implement decisions using fixed rules or logic. The Bill commentary expressly distinguishes this from systems involving learning, prediction or generative artificial intelligence (AI).
• The framework also requires Inland Revenue to consider efficiency, legal and privacy obligations and the need for appropriate human oversight.

PwC view

The framework should provide greater certainty and transparency around Inland Revenue’s use of ADM, particularly through the requirement for a published operational standard and defined safeguards.

The boundary between rules-based automation and learning or predictive AI will be important to maintain as Inland Revenue’s use of technology evolves.

The Bill also contains a substantial number of policy maintenance and remedial changes. Some are narrow drafting fixes, while others address long-standing compliance or black-hole issues. A few worth highlighting are:

• Land improvements: lessees of farmland that have borne the economic cost of qualifying land improvements or listed horticultural plants could deduct the residual tax book value where the assets have been destroyed or made commercially useless by circumstances outside their control and the lessee ceases business. Related amendments also tidy up the Subpart DO rules. 
• Software and SaaS: expenditure on an unsuccessful software development, configuration, customisation or integration project could be deductible even where the taxpayer would only have obtained a right to use software rather than software copyright. Ordinary non-exclusive software use arrangements would also generally be excluded from the finance lease rules. 
• Investment Boost: remedial amendments would bring new and newly imported aircraft engines within the rules and ensure that claiming Investment Boost on qualifying contaminant-remediation expenditure does not prevent a deduction for the remaining expenditure under the existing environmental deduction rules. 
• Transitional residence: from 1 April 2027, the transitional residence period would begin when a person becomes New Zealand resident under an applicable DTA tie-breaker, rather than potentially starting earlier under domestic residence rules. 
• Resident withholding tax: for dividends paid on or after 1 April 2027, the payer and recipient could agree to apply a 39% RWT rate, aligning withholding with the top personal marginal tax rate.

Several of these changes are practical fixes to known issues, particularly the SaaS and land-improvement amendments, which should reduce uncertainty and avoid unintended black-hole outcomes.

The Bill is a broad package of targeted changes rather than a single programme of structural reform. Across FBT, FIF, financial arrangements, NRCT, AIL, RDTI and GST, there is a clear focus on reducing compliance costs and tax friction where the revenue or integrity risk is low. At the same time, measures such as the tax-exempt beneficiary income rules and AIL deregistration strengthen integrity where specific risks have been identified.

The changes in the Bill reflect a shift towards a more pragmatic, risk-based approach. In a number of areas, the Government is accepting simpler rules and lower compliance burdens where the revenue risk is low, while using more targeted measures where particular integrity or compliance concerns arise.

As the Bill progresses, the real test will be whether the final rules are genuinely easier to operate in practice. Clear guidance, workable transition and proportionate thresholds will be critical.