Tax Policy Bulletin

Tax Policy Work Programme

Inland Revenue has released the latest tax and social policy work programme, which contains a number of matters which is split into the following workstreams: attracting and retaining capital and talent, supporting small businesses, simplification and integrity of the tax system and improving social policy. In a speech introducing the new work programme, Minister of Revenue Simon Watts highlighted a number of key inclusions, notably:

• Thin capitalisation settings, encouraging investment in infrastructure;
• Next phase of FIF regime reform, aimed at attracting and retaining talent;
• Not-for-profits/charities, focusing on donor-controlled charities and transparency around accumulation of funds; and
• Sole traders and small businesses, including consideration of a more flexible payment model.

These priorities will take the form of targeted and public consultation over the next twelve months, with some already in progress.

Labour Party announces targeted capital gains tax as part of election tax policy

Labour has announced their intention to campaign on what they are calling a ‘targeted capital gains tax’ on the profits on sale of commercial or residential property, with certain key exemptions including family homes, farms, KiwiSaver, shares, business assets, inheritances and personal items.

Per Labour’s press release, the tax is intended to shift New Zealand’s tax system away from rewarding property speculation rather than creating jobs and growing New Zealand’s economy. The tax would fund a proposed Medicard programme including funding GP visits for residents and citizens.

The tax would apply to gains made after 1 July 2027 and be aligned to the company tax rate at 28% to treat such profits similarly to other business activities. Further details including interest and depreciation deductibility are yet to be formally announced.

This announcement comes following Labour’s announcement of the Future Fund investment programme, and a proposed increase to the Game Development Sector Rebate paired with a lowered minimum annual spend threshold and increase to maximum rebate.

Recent Inland Revenue publications

• TDS 25/26 How does the business continuity test apply to a consolidated group? – This item summarises a private ruling about the exit of two company subsidiaries from a consolidated group and the sale of a third subsidiary (the sole remaining member of the consolidated group) to a third party. It considers the business continuity test and whether a specific anti-avoidance provision applies. Issued 28 October 2025. 
• TDS 25/25 Restructure and transfer of shares – This item summarises a private ruling about the transfer of shares between companies within a group as part of a restructure and whether any future sale of the shares is taxable. Issued 24 October 2025. 
• QB 25/21 Public private partnership projects and business continuity test for losses – This QWBA confirms that s IB 3(2)(c), which is a central requirement of the business continuity test, is not breached when a standard PPP project transitions from the design and construction phase to the operation and maintenance phase. Accordingly, a corporate PPP contractor may generally rely on the business continuity test to carry forward losses incurred during the design and construction phase, even if shareholder continuity is breached during that phase. Issued 23 October 2025. 
• TDS 25/24 The supply of accommodation in a serviced apartment – This item summarises a private ruling about the supply of accommodation in a retirement village that includes the provision of mandatory services and whether this constitutes the taxable supply of accommodation in a commercial dwelling. Issued 22 October 2025. 
• CSUM 25/12 High Court refuses to grant stay of liquidation pending outcome of judicial review proceeding - KD requested relief under s 177 of the TAA which the Commissioner declined. KD sought judicial review of the Commissioner’s decision declining its proposal for relief and also applied to stay the liquidation proceeding, pending determination of its judicial review application. The stay application needed an extension of time as it was made outside the five working day period prescribed in the High Court Rules. The application for an extension of time was dismissed, and the Associate Judge made an order liquidating KD. Issued 17 October 2025.

Open consultations

• PUB00501 Tax Administration – shortfall penalties – These two interpretation statements with accompanying reading guide and facts sheets set out the Commissioner's view on the evasion shortfall penalty and the abusive tax position shortfall penalty. The interpretation statements have been updated for case law and legislative changes. Consultation closes 15 December 2025 
• PUB00507 When does the fringe benefit tax exclusion for benefits relating to health or safety apply? – This QWBA explains how the FBT exclusion for benefits relating to health or safety applies. This QWBA is relevant to employers who provide their employees with benefits as part of their duty to manage risks to health or safety in the workplace. For the exclusion to apply, there must be a connection between the benefit and the employer’s duty to manage risks to health and safety under the Health and Safety at Work Act 2015. This QWBA complements the General Article on the health and safety FBT exclusion (2018) by providing more detailed guidance. Consultation closes 12 December 2025. 
• PUB00513 Working for Families tax credits and family scheme income – This interpretation statement gives an overview of eligibility for Working for Families tax credits and discusses the adjustments required to a person’s net income to determine family scheme income. Consultation closes 9 December 2025. 
• PUB00515 GST treatment of supplies of payment processing or facilitation services to merchants – The interpretation statement outlines how GST applies to entities providing payment processing or facilitation services, such as PSPs and BNPL providers. It provides a framework to determine whether services provided to merchants are financial services. When the supply to merchants includes settlement services, there will be a supply of financial services, and these supplies will be GST exempt (or zero-rated if applicable). The statement also explains whether there is a single supply or multiple supplies of services that may have different GST treatments. Consultation closes 8 December 2025. 
• PUB00510 Income tax – Can a deduction be claimed for asbestos removal costs? This question we’ve been asked explains what deductions a taxpayer can claim for the costs of removing asbestos from buildings, land or other assets that they own. Consultation closes 28 November 2025. 
• PUB00505 Income tax – deductibility of repairs and maintenance expenditure – general principles – This interpretation statement considers the general principles governing the income tax treatment of expenditure taxpayers incur in carrying out work on tangible property they use in a business or income-earning activity. It updates the Commissioner’s guidance from 2012 guidance with the same name (IS 12/03). IS 12/03 is widely used and often referenced in other guidance. Since depreciation is no longer allowed for buildings, it is now more important to correctly characterise repairs and maintenance expenditure. Consultation closes 28 November 2025. 
• PUB00509 Income tax implications of providing sponsorship – This consultation considers the income tax implications for a business that provides sponsorship to an organisation, event, person or cause, where the taxpayer (the sponsor) intends that the sponsorship will promote or advertise their business. The sponsorship may be provided in the form of money or by providing products or services. Consultation closes 21 November 2025.

Recently closed consultations

• PUB00500 Shortfall penalties – s141A, 141B and 141C of the Tax Administration Act 1994. The Commissioner is seeking public feedback on the update and replacement of the existing interpretation statements on the shortfall penalties for not taking reasonable care, taking an unacceptable tax position and gross carelessness. The existing items are still technically correct but are being updated for a number of legislative changes and new case law. Key changes include:
  • the circumstances in which a taxpayer who uses a tax agent will be treated as having taken reasonable care have been prescribed in the legislation and the removal of GST;
  • and withholding-type taxes from the scope of the unacceptable tax position shortfall penalty.

Consultation closed 31 October 2025.

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