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.
13 May 2025
Public advice and guidance work programme 2025-26
Each year the Tax Counsel Office at Inland Revenue prepares a programme of public guidance work for the following year. The Tax Counsel Office is now looking for suggestions for the 2025-26 public guidance work programme, specifically on tax technical or interpretative issues they should publish guidance on.
Inland Revenue has requested suggestions be made by 6 June 2025. See here for further information.
Use of Money Interest Rates decrease
The Taxation (Use of Money Interest Rates) Amendment Regulations 2025 (SL 2025/65) introduced updated UOMI rates, effective 8 May 2025.
- Taxpayers’ paying rate of interest on unpaid tax has decreased from 10.88% to 9.89% per annum.
- The Commissioner’s paying rate of interest on overpaid tax has decreased from 4.30% to 3.27% per annum.
Rate of interest on employment-related loans for fringe benefit tax purposes decreases
The Income Tax (Fringe Benefit Tax, Interest on Loans) Amendment Regulations 2025 (SL 2025/64) introduced updated UOMI rates, effective 8 May 2025. The regulations have decreased the rate of interest that applies for fringe benefit tax purposes to employment-related loans from 8.41% to 7.38%. The new rate applies for the quarter beginning 1 April 2025 and for subsequent quarters.
Looking forward - Budget 2025
Finance Minister Nicola Willis has announced that Budget 2025, dubbed the Growth Budget, will be delivered on 22 May 2025. As signalled previously we expect this will focus on various economic growth triggers. The Budget Policy Statement 2025 notes the following policy areas:
- Lifting economic growth through measures to address New Zealand's long-term productivity challenges.
- Implementing a social investment approach to drive better results from the Government’s investment in social services and thereby improve life outcomes for people with high needs.
- Keeping tight control of government spending while funding a limited number of high-priority Government policy commitments and cost pressures that cannot be met from reprioritisation.
- Developing a sustainable pipeline of long-term infrastructure investments.
Watch this space for further updates on Budget 2025 once published.
PwC publications
As stated above, Budget 2025 will be delivered on 22 May 2025. In this edition of Tax Tips, we consider some options that could be contenders for the Government as potential tax changes to enhance New Zealand's competitiveness.
Read more
Recent Inland Revenue publications
- IS 25/15 Look-through companies and disposal of residential land under the bright-line test This interpretation statement explains how the bright-line rules (including the main home exclusion and rollover relief) apply in various situations involving residential land and transfers involving a look-through company. This interpretation statement applies only to transfers on or after 1 July 2024. Issued 12 May 2025. This is accompanied by a fact sheet:
- IS 25/15 FS Look-through companies and disposal of residential land under the bright-line test - fact sheet This fact sheet accompanies an interpretation statement IS 25/15 Look-through companies and disposal of residential land under the bright-line test that explains how the bright-line test applies in various situations involving residential land and transfers involving a look-through company.
QB 25/08 - 25/14 The bright-line test for selling residential land. IR has published a total of seven Questions We’ve Been Asked (QWBA)documents to update previous QWBAs on the land sale rules, primarily to reflect changes to the bright-line test for disposals of residential land, all issued 9 May 2025.
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?
QB 25/15 How do the bright-line rollover relief provisions apply to transfers of residential land between associated persons? In addition to the updated QWBAs above which update earlier guidance, IR has issued this QWBA which 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 QWBA 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. Issued 9 May 2025.
TDS 25/12 Deductions and shortfall penalties. This technical decision summary considers whether the Taxpayer was entitled to input tax deductions it claimed. Whether the Taxpayer was required to return GST output tax on refunds. Whether the Taxpayer was liable for shortfall penalties. Issued 8 May 2025.
TDS 25/11 Deductions, zero-rating and shortfall penalties. This technical decision summary considers whether the Taxpayer was entitled to input tax and income tax deductions it claimed (including whether one of the transactions was zero-rated). Whether the Taxpayer was required to return GST output tax on refunds and dishonoured supply payments. Whether the Taxpayer was liable for shortfall penalties. Issued 8 May 2025.
IS 25/14 Income tax – arrangements involving tax losses carried forward under the business continuity rules: This interpretation statement sets out the Commissioner’s view on the potential application of the specific anti-avoidance rules in ss GB 3BA, GB 3BAB and GB 3BAC when a company carries a tax loss forward under the business continuity rules. Issued 5 May 2025.
TDS 25/10 Source of income and foreign tax credits: This technical decision summary involved two individual taxpayers who were shareholder employees and directors of a New Zealand registered company that provided services in New Zealand in an income year during which the Taxpayers resided overseas. The dispute concerned whether, for that income year, the Taxpayers’ PAYE income and shareholder salaries had a source in New Zealand. Deals with source of income; entitlement to foreign tax credits. Issued 1 May 2025.
TDS 25/09 Distribution and resettlement of trusts: This technical decision summary involves the distribution and resettlement of assets from several family trusts on to new family trusts. Deals with Income tax: disposal of trust assets; capital receipts; distribution of trust assets; settlement of trust assets; FIF income; FIF income calculation method. Issued 30 Apr 2025.
Open consultations
ED0265 Mutual transactions of associations (including clubs and societies): This draft operational statement explains the income tax treatment of amounts societies, clubs and other associations receive from members, other than amounts subject to a specific tax exemption such as for charities or sports clubs. The statement will be prospective in application when finalised. Consultation closes 25 June 2025.
PUB00494 Income tax – Whether money or property received by New Zealand tax residents from overseas is income from a foreign trust: This interpretation statement considers the income tax treatment of amounts of money or 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 or property is a trustee of a trust and when the resident taxpayer has derived beneficiary income or a taxable distribution from a foreign trust. A fact sheet has been included. Consultation closes 19 June 2025.
PUB00469 Income Tax – Whether an off-market share cancellation is made in lieu of the payment of a dividend: This interpretation statement considers the application of s CD 22(6) and (7) of the Income Tax Act 2007 in relation to the factors to be taken into account in determining whether an off-market cancellation of shares is made in lieu of the payment of a dividend. This statement updates the August 1999 interpretation statement, IS2966: Exclusion From The Term “Dividends”—Whether Distribution Made In Lieu Of Dividends’ Payment. Consultation closes 3 June 2025.
ED0259 Tax on any fees paid to a member of a board, committee, panel, review group or task force: This item is an update of GA 21/01 which was prepared specifically in relation to the fees paid to a member of a board, committee, panel, review group or task force under the Cabinet Fees Framework published by the Cabinet Office. 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. Consultation closes 28 May 2025.
PUB00484 The Commissioner’s duty of care and management – section 6A of the Tax Administration Act 1994: This Interpretation Statement sets out the Commissioner’s view on his “care and management” duty in s 6A of the Tax Administration Act 1994. In doing so, it clarifies the relationship between s 6A and the other provisions of the Inland Revenue Acts, including s 6 of the Tax Administration Act 1994, which requires the Commissioner to use best endeavours to protect the integrity of the tax system. Consultation closes 26 May 2025.
- GST and unincorporated joint ventures Public views are sought on proposals aimed at ensuring the GST rules applying to joint ventures are fit for purpose. Feedback will be used to inform final proposals. Consultation closes 16 May 2025.
For more information about upcoming consultations please see here for Tax Technical and here for Tax Policy.
Recently closed
Fringe benefit tax – options for change Public views are sought on options for simplifying fringe benefit tax obligations and minimising compliance costs. Feedback will be used to inform final proposals for Government to consider. Consultation closed 5 May 2025.
- 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 closed 2 May 2025.
