This year’s revenue package focusses on reducing compliance costs, maintaining integrity, and helping retain capital and talent in New Zealand, with supporting material signposted through Inland Revenue and tax policy channels. Many of these measures are proposals and will be confirmed through legislation and IRD guidance, so keep an eye on future editions of tax watch for more updates.
Foreign Investment Fund (FIF)
An increase to the FIF de minimis from $50,000 to $100,000 has been signalled to reduce the number of smaller investors who must apply FIF rules. It could also expand Revenue Account Method (RAM) access so New Zealand residents with unlisted foreign shares can be taxed on realised gains and actual dividends rather than deemed FDR income. Technical settings have also been proposed to preserve access to methods and exemptions for founders and corporate migrations, including issues where listings occur via SPAC-style processes.
Applies: Proposed to apply from 1 April 2026, for the 2026–27 tax year.
R&D tax incentive (RDTI)
Budget 2026 proposes a package to better target RDTI, including in year (quarterly) payments to improve cashflow for start ups, administrative flexibility for late or minor errors in RDTI filings, expanded eligible mining R&D expenditure, and reducing the non administrative internal software cap from $25m to $3m per year. The internal software change aims to prioritise R&D with broader spillover benefits, while still allowing claims for external software products intended for customers.
Applies: Most changes are proposed from the 2027–28 income year, with some administrative discretions proposed from 1 April 2027.
Fringe Benefit Tax (FBT)
Yesterday, the Finance Minister also announced simplification of FBT on private motor vehicle use, including removing the requirement for detailed logbooks and adopting a more pragmatic “close enough” compliance approach to materially reduce employer compliance costs.
Applies: This is positioned as a compliance cost reform for employers, with detail to follow in legislation and IRD guidance. The changes would apply for benefits provided after 1 April 2027.
Proposed integrity rule
Under this proposed rule, six months after a company is liquidated or removed from the Companies Register, any outstanding loans the company previously made to shareholders would be treated as taxable income to the former shareholder. The policy intent is to prevent situations where loans are effectively value extraction that is never repaid, and to protect the tax base.
Applies: Effective date to be confirmed in legislation, but the proposal is keyed off a “six months after removal” trigger and will apply from any company removed on or after 4 December 2025.
Thin capitalisation, foreign owned NZ banking groups, align with prudential requirements
Updates to thin capitalisation settings for foreign owned NZ banking groups have also been proposed in Budget 2026 to better align tax settings with prudential requirements, supporting a stable and predictable system while protecting the tax base.
This is likely to be technical and highly targeted but could alter funding and capital structure outcomes for affected banking groups.
Applies: Commencement to be confirmed once the implementing bill is introduced.
Charities and Not for Profits
There is also a suite of changes for the charitable sector in this year’s Budget, including increasing the effective tax free threshold for smaller taxable not for profits from $1,000 to $10,000; this would apply from the 2027-2028 income year. Other proposals that would be staged from 1 April 2027 are:
- keeping membership subscriptions and levies non taxable
- introducing a cap on donations eligible for a donation tax credit at the lower of $100,000 or the
- donor’s taxable income (credit rate retained at 33⅓%).
Donor process changes from 1 April 2028 have also been proposed, including:
- optional in year donation credit refunds via myIR
- the ability to gift donation credit refunds to the charity
- the repeal of an income tax exemption for non resident charities with no NZ charitable purpose.
Integrity measures for trust allocations to tax exempt beneficiaries requiring payment within a specified period are also on the table for the 2028-29 income year.
New prudential levy on banks and other financial institutions (funding RBNZ supervision)
A proposal has been introduced for a new prudential levy on banks, non bank deposit takers, insurers, and other financial market participants to help cover the cost of Reserve Bank regulation and supervision, with forecast recovery of roughly $209 million over four years. The approach is intended to shift supervisory funding from general taxpayers to regulated entities, consultation is expected to follow, with Cabinet decisions targeted early 2027 and introduction targeted mid 2027.
Applies: Consultation after Budget 2026, decisions aimed early 2027, levy targeted for mid 2027 introduction.
Inland Revenue compliance funding, debt collection and integrity enforcement uplift
Budget 2026 includes an investment of $15 million per annum for IRD debt compliance activities, continuing the Government’s emphasis on collection and enforcement, with commentary referencing significant overdue tax collections to date. This is relevant for businesses with arrears, disputes, and high risk segments, and it tends to increase audit, follow up, and debt escalation activity.
Applies: Exact initiative start dates are administrative and will flow through IRD activity.
Non-resident contractors tax (NRCT) modernisation
Proposed changes have been put forward to modernise the non-resident contractor withholding tax (schedular payments) system. The proposals will increase the $15,000 limit to $75,000 for services in the year, eliminate the need to know what other work the non-resident contractor is undertaking in New Zealand, and exclude some low risk entities from the regime (for example branches and rep offices).
Applies: The changes would apply from 1 April 2027.
NRCT exemption for aircraft asset leasing
The proposal exempts payments for “dry leasing” of aircraft and aircraft parts from non resident contractors’ tax, with effect from 1 April 2026, meaning overseas lessors would no longer be taxed on gross payments in New Zealand. This is intended to address situations where tax is currently imposed on revenue rather than profit, which can increase costs and distort leasing arrangements.
Applies with effect from 1 April 2026
Financial arrangement changes to support new migrants
This proposal is to lower the impact that foreign exchange rate movements have on investments which are not in NZD, and in particular reduce exposure to unrealised gains and losses resulting from foreign exchange. This will particularly help new migrants who often have more foreign currency arrangements. The proposal will also exclude some lower risk and common financial arrangements from the ambit of the financial arrangement rules, such as personal bank accounts, mortgages on private homes, and credit cards with foreign banks.
