Tax Policy Bulletin

Inland Revenue – Compliance Update

Inland Revenue recently issued a media release in relation to their increased compliance budget. The release includes interesting insights into Inland Revenue’s expected return on investment and some key statistics from how the increased compliance budget has been spent to date. Among others, one key insight includes that in the year to 31 March 2025, Inland Revenue have assessed additional tax of $880.8 million from audit activity.

One Big Beautiful Bill Act

The US is advancing tax reforms (the “One Big Beautiful Bill”) targeting countries with rules like the Pillar Two UTPR, which could see New Zealand classified as discriminatory. This may result in higher US withholding taxes, increased corporate tax on US branch profits, and an expanded BEAT regime for NZ-owned entities. Businesses should assess the potential impact on their US operations. We will be sharing a Tax Tips update on this topic shortly – watch this space and sign up for updates here if you haven’t already.

Recent Inland Revenue publications

• TDS 25/14 Business restructure. This technical decision summary relates to the restructure of a business to change its ownership structure, involving various transactions and tax implications. Issued 6 June 2025.
• OS 19 04 (KM 2025) Kilometre rates for the business use of vehicles for the 2025 income. This operational statement sets out the kilometre rate 2025 income year for business motor vehicle expenditure claims. Issued 30 May 2025.
• Various information releases. Inland Revenue have issued information releases on the following matters:
  • Income Tax (Fringe Benefit Tax, Interest on Loans) Amendment Regulations 2025
  • GST and unincorporated joint ventures
  • Taxation (Use of Money Interest Rates) Amendment Regulations 2025
• Various CPI adjustments to Operational statements & Determinations. Inland Revenue have issued several updated operational statements and determinations to reflect the annual CPI adjustment. Issued 30 May 2025. Publications include the following:
  • DET 09/02 (CPI 2025) Standard-cost household service for childcare providers.
  • DET 19/01 (CPI 2025) Household boarding service providers.
  • DET 19/02 (CPI 2025) Short-stay accommodation.
  • OS 19 03 (CPI 2025) Square metre rate for the dual use of premises.

Open consultations

• PUB00497 Student Loans – Overseas borrowers and their obligations: This interpretation statement discusses when a student loan borrower will be a New Zealand-based borrower and when they will be an overseas-based borrower. A borrower’s status as New Zealand-based or overseas-based will determine whether interest accrues on their loan and will impact their repayment obligations. Consultation closes 18 July 2025.
• Empowering families: Increasing certainty and preventing debt in the Working for Families scheme The Government wants to hear public views 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. Consultation closes 3 July 2025.
• PUB00496 GST listed services rules: This QWBA discusses: 
  • When is a supply of listed services made through an electronic marketplace?: This QWBA  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.
  • GST listed services rules: How do the rules apply when there is a supply of listed services and other goods or services? This QWBA 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. Consultation closes 27 June 2025. 
• 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.
• Thin capitalisation settings for infrastructure Officials are seeking feedback to gain a better understanding of how the current thin capitalisation settings might be discouraging foreign investors from investing in infrastructure projects in New Zealand, and whether changing those settings will lead to more infrastructure investment in New Zealand. Public views are also sought on the key components of two possible solutions to address the potential issue. Consultation closes 19 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.

For more information about upcoming consultations please see here for Tax Technical and here for Tax Policy.

Recently closed

• 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 closed 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 closed 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 closed 26 May 2025.