Tax Policy Bulletin is a regular round-up of recent tax headline news. If you'd like any further detail on the items reported in the update, please reach out to your usual PwC tax advisor.
14 March 2025
Government signals intent to amend to the foreign investment funds (FIF) rules
In December 2024, Inland Revenue released for public consultation the Effect of the FIF rules on immigration: proposals for amendments. In this paper, Inland Revenue acknowledged some of the issues with the current FIF rules which could be deterring some people from choosing to settle in New Zealand.
A key proposed amendment included introducing the ‘revenue account method’ whereby only dividends received and any gain in value of those investments attributable to New Zealand on disposal or emigration would be taxed.
The Minister of Revenue, Hon Simon Watts recently spoke favourably about the proposal, stating “the current FIF rules are a key deterrent for migrants and returning Kiwis” and that the Government wants to act swiftly to remove these barriers imposed by the FIF rules to encourage investment in the New Zealand economy. While the scope of the amendments is not entirely clear in regard to whether the rules will also extend to New Zealand residents, Mr. Watts indicated that the Government is looking closely at the FIF rules and proposals will be included in the next tax bill, set to be released in August.
Tax Bill reported back
The Finance and Expenditure Committee (FEC) released its report back at the end of February in relation to the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Matters) Bill (the Bill). We outlined some of the key recommendations in our last Tax Policy Bulletin, available here.
PwC publications
Take a look at PwC’s commentary on the Government’s Half Year Economic and Fiscal Update (HYEFU). The HYEFU highlighted a deterioration in the economic and fiscal outlook compared to Budget 2024 forecasts - economic growth is predicted to begin to recover from 2025. However, it will be slower than previously forecast. The fiscal outlook is weaker across all indicators compared to Budget 2024.
Read more
Recent Inland Revenue publications
Proposed foreign investment fund changes - Fact sheet Inland Revenue has published a fact sheet that provides more information on how the Government’s proposed changes to the foreign investment fund rules will work. When the proposals are included in a taxation Bill, more information will be published on this website.
Student Loan Scheme Repayment Threshold This information release includes documents relating to Student Loan Scheme Repayment Threshold. The Cabinet agreed to indefinitely freeze the current policy of adjusting the student loan repayment threshold by CPI, and to retain the threshold at the current income level of $24,128 per annum.
Taxation (Use of Money Interest Rates) Amendment Regulations 2024 This information release includes updates to the Taxation (Use of Money Interest Rates) Amendment Regulations 2024. Decreases to the UOMI underpayment rate to 10.88% (from 10.91%) and to the UOMI overpayment rate to 4.30% (from 4.67%) are effective 16 January 2025.
TDS 25/06 Receipt of funding. This technical decision summary considers the following topics: Income, capital/revenue, capital contribution property, and considers whether the Funding was income to the Applicant under ss CA 1(2), CB 1, CG 4 and CG 8.
IS 25/04 What an employee share scheme is, the taxing date and apportionment. This interpretation statement considers what an employee share scheme is, including the exclusions to the definition, and explains when the share scheme taxing date arises and when shares are held by or for the benefit of an employee. It also covers the circumstances when the share scheme taxing date may be deferred, and addresses how benefits are apportioned when some of the employee’s entitlement arises when they are non-resident.
TDS 25/05 GST - input tax, taxable activity, taxable supplies, registration. This technical decision summary considers whether the Taxpayer was entitled to the input tax deductions it claimed in the previous two years. The Taxpayer had not made any taxable supplies during the previous five years.
TDS 25/04 Deductions and shortfall penalties. This technical decision summary considers whether expenditure incurred by the Taxpayer on educational courses, motor vehicle costs, home office costs, power, insurance, rent, advertising, website, eftpos, and stock was deductible.
TDS 25/03 GST – Output tax deductions, shortfall penalties. This technical decision summary considers whether the Taxpayer was entitled to output tax deductions for indemnity payment under a deed, and the liability for shortfall penalties.
Open consultations
- PUB00400: Income tax – How do the income tax rules apply when a close company provides short-stay accommodation? This QWBA explains how the income tax rules apply when a close company provides short-stay accommodation (eg, through Airbnb, Bookabach, Booking.com or Holiday Houses). It explains when and how the mixed-use asset rules and the standard tax rules apply, and when shareholders or employees will receive income from their use of the property. Consultation closes 2 May 2025
- PUB00485 GST - Deposits a seller retains from cancelled land sale agreements. This QWBA explains the GST consequences when a land sale agreement is cancelled and the seller retains the deposit. It updates previous guidance from 2005. The answer remains that GST does not apply to the deposit but the reasoning has been expanded to consider matters that have arisen since the last statement was published that may have affected the answer. Consultation closes 17 April 2025.
PUB00460: When is land acquired for a purpose or with an intention of disposal so that the amount derived from the sale is income? This draft QWBA provides guidance about the circumstances in which an amount derived from the disposal of land acquired with a purpose or intention of disposal is income under s CB 6. The QWBA explains how s CB 6 applies, and its relationship with the 2-year bright-line test. The proposed QWBA also discusses some common misconceptions about s CB 6 and includes examples illustrating when it will apply. This consultation is running in conjunction with PUB00488. Consultation closes 11 April 2025.
PUB00488: The bright-line test for selling residential land. The Commissioner is seeking public feedback on changes to six existing QWBAs. The changes relate to the bright-line test for selling residential land. These updates will align the QWBAs with the current 2-year bright-line test, improving clarity for customers. Although the Commissioner is consulting on these updates, the substantive change relates to changes in the law since the original QWBAs were published. Consultation closes 11 April 2025.
PUB00476: GST - taxable activity: This draft interpretation statement sets out the Commissioner’s view on the meaning of “taxable activity” under the GST Act. The Commissioner has discussed this concept in numerous public items, but generally in a specific context such as subdivisions of land, horse racing or horse breeding. This statement is of more general application. Consultation closes on 4 April 2025.
Taxation and the not-for-profit sector: The consultation document considers whether certain tax concessions available to the sector continue to be effective. It also explores whether tax obligations can be simplified, and compliance costs minimised. Government will consider feedback and decide whether any changes should be made to current rules. Consultation closes on 31 March 2025.
- PUB00459: Income tax: Can I claim a deduction for expenses I incur on repairing a recently acquired capital asset? This QWBA considers whether a taxpayer can deduct for income tax purposes the amount of expenditure they have incurred to repair a capital asset that they have recently acquired so they can use it in their business or income-earning activity. Consultation closes on 28 March 2025.
For more information about upcoming consultations please see here for Tax Technical and here for Tax Policy.
Recently closed
Consultation on employee share scheme timing issues. Inland Revenue has launched consultation on a policy proposal to address a taxation timing issue for employee share schemes offered by start-up companies. The proposal suggests deferring the taxation point for eligible schemes, as well as the company's deduction, until a liquidity event occurs to fund the tax on income. Officials seek views on the desirability and feasibility of such an approach. Consultation closed on 14 March 2025.
ED0263: Cash collateral is “money lent”. The Commissioner has previously taken the view that payments of money in the form of cash (cash collateral) as part of, and to secure obligations under, security lending and derivative transactions was not money lent, so there was no RWT or NRWT withholding obligation for the interest payments arising. This draft Operational Statement outlines a change of view by the Commissioner and sets out the new approach. Consultation closed 28 February 2025.
PUB00493: Income tax and GST – industries other than forestry registered in the Emissions Trading Scheme. This interpretation statement applies to industries registered in the Emissions Trading Scheme, other than forestry which is taxed differently. The statement sets out the conceptual framework for the income tax treatment of emission liabilities and emissions units (NZUs) in these sectors. It then explains how to calculate deductions for emission liabilities and it discusses the treatment of NZUs as income. Finally, there is a brief discussion of the GST treatment of NZUs. Consultation closed 27 February 2025.
