The Taxation (Annual Rates for 2025-26, Compliance Simplification and Remedial Measures) Bill, introduced in August, is positioned as a “compliance simplification” package. On closer look, it contains several substantive reforms. Many address areas where the current law is either impractical or overly complex, while others refine rules to better reflect modern circumstances, such as remote workers and small-scale renewable energy.

Below is a summary of the key proposals likely to be of immediate interest to businesses, highlighting how they differ from the current rules. Separate articles will cover the Investment Boost remedials and the repeal of trust disclosure requirements.

Tax residence rules for non-resident visitors (Digital nomads)

Current position

A visitor becomes tax resident if they are in New Zealand for more than 183 days in any 12-month period. This can capture “digital nomads” who are only earning offshore income, exposing them to full New Zealand tax on worldwide income.

What’s new

The Bill introduces a “non-resident visitor” category.

• Visitors can stay in New Zealand for up to 275 days in any 18-month period without triggering tax residence, provided they remain tax resident in another jurisdiction and do not work for a New Zealand employer.
• Income from services performed in New Zealand for foreign employers or clients will be exempt from New Zealand income tax.
• Visitors exceeding the 275-day threshold, or breaching the work limitations, will transition into New Zealand’s ordinary residence rules.

Foreign Investment Fund (FIF) – Revenue account method

Current position

FIF interests are generally taxed annually on an accrual basis, using the fair dividend rate (FDR) or comparative value method. This can create tax liabilities on unrealised gains and require costly valuations.

What’s new

The Bill introduces a new revenue account method (RAM), applying retrospectively from 1 April 2025.

• Income will be taxed on dividends and gains or losses at disposal, not on annual accrual calculations.
• Disposal gains will be taxed after a 30% discount, and losses can only offset gains from other RAM-eligible interests.
• Eligibility is restricted to unlisted shares acquired before becoming a New Zealand tax resident, with specific provisions for recent migrants and returning residents.

GST and Joint ventures

Current position

The GST treatment of unincorporated joint ventures can result in significant compliance costs in some situations where the joint venture itself rather than the participants is the supplier for GST purposes. This has caused inconsistent practices. Some joint venture participants were continuing to return GST individually, rather than through the joint venture.

What’s new

The Bill introduces new rules to allow joint venture participants to return GST individually. The aim is to reduce uncertainty and compliance costs for bloodstock breeders, property developers, contractors, and others operating through joint ventures.

Employee Share Scheme (ESS) deferral regime

Current position

Employees of unlisted companies are generally taxed when shares vest, even if they cannot sell them. This creates liquidity issues where employees face tax without cash to pay it.

What’s new

A new optional deferral regime shifts the taxing event from vesting to an exit event (e.g. sale, listing, buy-back). This means employees are taxed when they can more readily realise value, though in many cases the shares will have increased in worth, and the ultimate tax liability may therefore be larger.

Fringe Benefit Tax (FBT) remedials

Current position

Issues have arisen with outdated thresholds, inconsistent treatment of gift cards, and overlap between PAYE and FBT. For example, “open loop” gift cards (usable widely like money) are currently treated as PAYE income whereas all other gift cards are currently subject to FBT.

What’s new

Threshold updates ensure consistency with personal income tax changes.

• A new category of “gift card benefits” is created for FBT bringing open loop gift cards into the regime consistent with other gift cards which are currently subject to FBT as an unclassified benefit. However, where a card is regarded as “in the nature of remuneration”, or the employer chooses to treat the benefit as employment income, PAYE will still apply.
• As gift cards will no longer be categorised as an unclassified benefit, the current quarterly employee de minimis exemption will not be available.
• Clarifications prevent double taxation where both PAYE and FBT could apply.

Proposed changes to the calculation of FBT on motor vehicles and other benefits haven’t proceeded at this time.

Residential supply of excess electricity

Current position

The tax treatment of income from selling surplus residential electricity (e.g. solar power fed into the grid) has been uncertain.

What’s new

The Bill introduces a specific tax exemption for income derived by an individual from the residential supply of excess electricity back to the grid. The exemption ensures that households with solar panels are not taxed on incidental sales of surplus power. Only where the activity amounts to a business would income remain taxable.

Increase in cash basis person thresholds

Current position

Taxpayers can account for financial arrangements (e.g. loans, deposits) on a cash basis if under certain thresholds, but these have not been updated for some time, reducing their usefulness.

What’s new

The thresholds will be increased to reflect current economic conditions, allowing more taxpayers to use the simpler cash basis method instead of accrual calculations.

Repeal of Section 17GB (Information Request Power)

Current position

Section 17GB of the Tax Administration Act gives Inland Revenue the power to request information for tax policy purposes, in addition to its compliance powers. This has raised concerns about scope and proportionality.

What’s new

The Bill proposes a full repeal of s 17GB. Inland Revenue’s view is that its other information-gathering powers are adequate for policy purposes, although the sufficiency of those provisions is not beyond doubt.

Final thoughts

Although framed as “remedials and simplification,” the Bill introduces practical shifts: recognising digital nomad realities, easing the FIF rules for migrants, simplifying GST joint venture treatment, and providing long-needed ESS tax relief. Other measures clean up inconsistencies in FBT, clarify minor but irritating ambiguities (such as excess solar sales), and ease compliance burdens (with increase of cash basis thresholds). CA ANZ will also make a comprehensive submission on the Bill.