The latest Tax Bill is a big one. 

Introduced on 10 September, the Taxation (Annual Rates for 2026–27, FBT Simplification, Foreign Investment Funds, and Remedial Measures) Bill brings together a wide range of changes, from a new approach to FBT on motor vehicles to changes affecting foreign investments, financial arrangements, R&D, not-for-profits and cryptoassets. 

There are also more than 40 remedial items in the Bill. So, where should practitioners start? Here are some of the key proposals worth watching.

A different way of dealing with FBT on vehicles

The current rules generally require employers to keep track of the days a vehicle is available for private use. The Bill proposes replacing this with a category-based system, where employers select a category based on the expected private use of a vehicle and apply the relevant rate.

The aim is to reduce the compliance burden. Inland Revenue describes it as a “close enough is good enough” approach, designed to create a largely “set and forget” regime. 

The Bill also introduces new valuation rates for hybrid and electric vehicles for FBT calculations. The new motor vehicle rules are proposed to apply from 1 April 2027.

FIF changes go beyond recent migrants

Foreign investment funds are another major focus, with seven changes proposed. 

One of the more significant changes is wider access to the revenue account method (RAM). The method allows eligible taxpayers with qualifying unlisted foreign shares to be taxed on a realisation basis, with a 30% discount on realised gains. Access, which is currently restricted to certain recent migrants, would be extended more widely.

The FIF de minimis threshold would also double from $50,000 to $100,000, reflecting inflation since it was set in 2000. 

Other proposals would expand access to the attributable FIF income method, modernise the 10-year FIF exemption where New Zealand businesses list overseas, address indirect FIF interests and provide more flexibility around FIF calculation methods.

Most of these changes are proposed to apply from 1 April 2026. A separate change to the RAM exit tax, addressing people who become non-resident under a tax treaty, would apply from 1 April 2027.

Taking some volatility out of financial arrangements

The Bill also tackles the impact of foreign exchange movements under the financial arrangements rules. 

A proposed elected functional currency rule would allow eligible taxpayers to calculate their financial arrangement income or expenditure in a foreign currency and then convert the result into New Zealand dollars. In effect, this would take unrealised foreign exchange movements out of the financial arrangements calculation, reducing some of the volatility that can arise under the current rules.

Generally, only natural persons would be able to use the new rule, with limited extensions for certain family businesses and trusts.

Other proposals address certain taxpayers taxed on a citizenship basis, Active Investor Plus Visa holders and some low-risk foreign currency arrangements. Most of these changes would apply from 1 April 2027. 

Earlier R&D tax credit payments

For businesses undertaking R&D, one of the headline changes is about timing.

From the 2027–28 income year, businesses could receive up to 80% of their expected Research and Development Tax Incentive (RDTI) credit through in-year payments, rather than having to wait until their annual RDTI filing is completed.

The Bill would also give the Commissioner greater discretion to extend RDTI return due dates and correct certain claims where there has been a genuine mistake, oversight or circumstances outside the taxpayer's control. 

Other changes include expanding eligible R&D expenditure for mining businesses and reducing the annual cap for internal software development expenditure from $25 million to $3 million. Software developed for sale or licensing would remain fully eligible.

Changes for not-for-profits and donors

Taxable not-for-profits also have several changes to consider.

The Bill proposes increasing the statutory deduction for taxable not-for-profits effectively a tax-free threshold from up to $1,000 to up to $10,000 from the 2027–28 income year. The deduction would be targeted at organisations with net income of $10,000 or less and would operate as a cliff. Organisations with income over $10,000 would not be eligible for the deduction.

The Bill would also clarify the tax treatment of membership subscriptions, fees and levies. Broadly, income that would not have been taxable under the mutuality principle, but for restrictions on distributions, would be exempt. However, profits from selling trading stock or providing services to members would continue to be taxable under the existing provisions.

Further changes to donation tax credits are planned from 1 April 2028. These include allowing donation tax credit refunds to be paid during the year and giving donors the option of having the refund transferred directly to the charity they supported.

And that's not all

There is much more in the Bill than these headline changes.

Among other things, it proposes new rules for cryptoasset lending and an exemption from income tax for certain gains and losses on qualifying stablecoins. There are GST changes covering surplus electricity generated at residential premises and sold to electricity retailers, as well as goods and services acquired before GST registration.

A “single entity view” is proposed for non-resident contractors' tax (NRCT) and the monetary exemption threshold would increase from $15,000 to $75,000, while other proposals cover the approved issuer levy regime, land improvements, thin capitalisation rules for foreign-owned banks, tax intermediaries and Inland Revenue's use of automated decision-making.

The Bill would also allow RWT on dividends to be deducted at 39%, rather than the default 33%, where the payer and recipient agree, from 1 April 2027. This change is a result of ongoing engagement between the CA ANZ National Tax Liaison Group and the local liaison group network with Inland Revenue.  The proposed amendment will reduce compliance costs and improve the efficiency of the tax system. 

With so many proposals, different commencement dates and plenty of detailed conditions, there will be a lot for practitioners to work through. In upcoming editions, we will take a closer look at some of the key proposals, what they could mean in practice for members and their clients, and CA ANZ’s views and recommendations as we develop our submission on the Bill.