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.
28 May 2025
Budget 2025
Budget 2025, otherwise referred to as the ‘Growth Budget’, was published on 22 May 2025 alongside the Budget Bill. Key tax takeaways from Budget 2025 are as follows:
- The ‘Investment Boost’ - allowing for accelerated depreciation of 20% of an asset’s value in the year it is acquired - including otherwise non-depreciable new commercial and industrial buildings.
- Thin capitalisation review for infrastructure - a review of thin cap settings for infrastructure to encourage foreign investors to invest in privately owned infrastructure projects.
- KiwiSaver - increasing the default employer and employee contributions, decreasing the annual Government contribution, and removing the Government contribution for taxpayers earning over $180,000 per year.
- Employee share schemes (ESS) - proceeding with reforms consulted on, specifically a deferral for taxation of income until there is a liquidity event (e.g. sale of shares).
- Fringe benefit tax (FBT) - proceeding with reforms consulted on which included the introduction of a simplified approach to calculating FBT on motor vehicles.
- Best Start & Working for Families - increasing the abatement threshold for Working for Families (the income level at which entitlements begin to reduce) but introducing income testing or the Best Start tax credit so that the amount received is abated depending on your income.
See PwC’s Tax Tips here for further information on tax matters, and commentary published by Inland Revenue on the Budget Bill here. The Budget Bill passed on the 22nd of May and is expected to receive royal assent shortly.
Digital Services Tax Bill discharged
The Digital Services Tax Bill (288-1), introduced in 2023, was intended to allow the Government to impose, at an appropriate time, a tax on gross revenues of large multinational entities with highly digitalised business models that earn income from New Zealand.
Minister of Revenue Simon Watts announced on 20 May 2025 that the Government has decided to discharge the Digital Services Tax Bill from the legislative programme due to the Government’s preference to participate in a global solution to enable an agreed, consistent outcome across participating countries.
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.
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.
PwC publications
As stated above, Budget 2025 was delivered on 22 May 2025. In our latest edition of Tax Tips, we outline the key areas of focus for tax.
Read more
Recent Inland Revenue publications
- QB 25/16 Income tax – How do the income tax rules apply when a close company provides short-stay accommodation? This question we’ve been asked (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. Issued 23 May 2025.
- TDS 25/13 Income tax - land transferred within a tax consolidated group. This technical decision summary covers intragroup land transactions, consolidation rules, distribution in kind. Issued 19 May 2025.
- IS 25/16 Tax residence. This interpretation statement explains the tax residence rules in the Income Tax Act 2007. It covers the tax residence of natural persons (individuals) and companies, and the residence implications in relation to trusts. Issued 16 May 2025. This is accompanied by the following fact sheets:
- IS 25/17 Tax residence - government service rule. This interpretation statement explains the government service rule in the Income Tax Act 2007 and discusses the articles of double tax agreements that may need to be considered if the government service rule applies. Issued 16 May 2025.
- 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 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 9 May 2025.
Open consultations
- 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.
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.
For more information about upcoming consultations please see here for Tax Technical and here for Tax Policy.
Recently closed
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.
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 closed 16 May 2025.
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 the 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.
