Tax Policy Bulletin

Draft of Inland Revenue’s long-term insights briefing 2025

Inland Revenue has released a draft of its long-term insights briefing for 2025 (the “LTIB”). The LTIB is a future-focused think piece that provides information on long-term trends, risks and opportunities as well as possible policy responses. The briefing is developed by Inland Revenue independently of ministers and are not current government policy.

The 2025 LTIB explores the implications of rising fiscal pressures for New Zealand’s tax system and what changes could be made to our tax system to enhance fiscal resilience.  It looks at the underlying economic factors that different tax bases can tax and the pros and cons of various tax system design choices. The 2025 LTIB is accompanied by a ten-page summary document, as well as some additional analytical notes. The closing date for feedback is 1 September 2025.

One Big Beautiful Bill Act

The US has officially dropped Section 899, a proposed retaliatory tax aimed at countries implementing the Pillar Two Under-Taxed Payments Rule (“UTPR”). This follows an agreement in principle with the G7, paving the way for broader discussions at the OECD Inclusive Framework (“IF”) level.

A statement from the OECD Secretary-General welcomed the development, while noting that the details still need to be worked through by the IF. The agreement includes:

• US headquartered groups: A proposed “side-by-side” approach that could effectively switch off the UTPR and Income Inclusion Rule (“IIR”) for US-parented groups, on the basis that US domestic tax rules achieve - or will achieve - broadly equivalent outcomes. 

• US Subsidiaries: A commitment to review the treatment of non-refundable tax credits - such as the US R&D credit - under Pillar Two, to address potential distortions.

If adopted, the deal could mean that NZ entities ultimately owned by US groups may fall outside the scope of NZ’s Pillar Two regime. However, this remains an agreement between the G7 members in principle only, and significant work lies ahead to finalise and implement the approach.

Recent Inland Revenue publications

• Fringe Benefit Tax – options for change This information release includes documents relating to Fringe Benefit Tax – options for change. Issued 30 June 2025.

• OS 25/04 The Commissioner of Inland Revenue’s search powers This operational statement outlines the procedures the Commissioner of Inland Revenue will generally follow when exercising the Commissioner’s search powers under ss 17, 17C and 17D of the Tax Administration Act 1994 and the Search and Surveillance Act 2012. Issued 27 June 2025.

• OS 25/05 Section 17B Notices This operational statement outlines the procedures the Commissioner will generally follow when issuing notices, including to third parties, under s 17B of the Tax Administration Act 1994. Section 17B, which relates to information demands, contains one of the Commissioner’s information-gathering powers. The Commissioner can use other information-gathering powers (such as s 17) in conjunction with s 17B, but they are not discussed in this statement. Issued 26 June 2025.

• TDS 25/16 Charitable trust – transfer of assets. This item summarises a private ruling that addressed income tax issues arising from the transfer of assets from a charitable trust. Issued 26 June 2025.

• Taxation (Budget Measures) Act 2025 – Act commentary The Taxation (Budget Measures) Act 2025 received Royal assent on 29 May 2025. The Act commentary provides an explanation of the changes made by the Act, which introduces Investment Boost, along with changes to KiwiSaver and Working for Families. Issued 25 June 2025.

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.

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

Recently closed

• 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 closed 3 July 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 closed 25 June 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 closed 27 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 closed 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 closed 19 June 2025.