This Government bill makes wide-ranging amendments across the Income Tax Act 2007, the Goods and Services Tax Act 1985, and the Tax Administration Act 1994. The most consequential changes introduce a new “revenue account method” (RAM) for calculating income and losses from certain foreign investment fund (FIF) interests, a statutory non‑resident visitor category with a 275‑day threshold and tax exemptions for some short visits, and new rules treating gift cards as benefits with an employer election and a clear valuation rule.
The bill also revises the new investment asset (DI5) rules — including a formal change‑of‑use recapture when business use drops by 25% or more — and creates several operational powers and determinations for the Commissioner.
Why it matters: the package alters timing and measurement of income for taxpayers with offshore shares, changes when non‑residents and short‑term visitors pay New Zealand tax, imposes new reporting and attribution consequences on employers who give gift cards or reimburse benefits, and shifts more practical decision‑making to the Commissioner (rate determinations, publication requirements, and controlled disclosures to specified government agencies). For tax counsel and compliance teams this is a mix of new elective options, ring‑fencing constraints, definitional changes, and fresh administrative requirements that will affect valuations, returns, payroll, GST joint‑venture treatment, and privacy governance.
At a Glance
What It Does
Creates a new revenue account method (RAM) as a sixth FIF calculation method with detailed rules for when and how RAM may be chosen, a formula for net disposal amounts (including a 0.7 multiplier), and ring‑fencing of RAM deductions. Establishes a statutory non‑resident visitor status (275‑day test) with narrow exemptions for income derived during visits and related company‑residence treatments. Treats gift cards as unclassified benefits unless an employer elects otherwise and fixes their taxable value as the amount loaded. Introduces DI5 and CC15 clarifications for new investment assets, including a 25% change‑of‑use recapture and adjusted‑tax‑value increases.
Who It Affects
Natural persons and trustees holding offshore shares who qualify as RAM taxpayers or extended RAM taxpayers; returning residents with historical FIF exposures; employers that issue gift cards or reimburse employee benefits; taxpayers that claimed DI5 deductions for ‘new investment assets’ and later change use; GST joint ventures choosing flow‑through treatment; and Inland Revenue with expanded disclosure, publication, and rate‑setting responsibilities.
Why It Matters
The RAM introduces a materially different measurement approach and new ring‑fencing rules that change timing of taxable gains and losses and can produce suspended recognition and market‑value events on method changes or residency shifts. The non‑resident visitor carve‑out creates a distinct short‑visit tax regime with operational tests and cross‑border residency interactions. The gift‑card, reimbursement, and DI5 technical changes will force payroll, fixed‑asset, and depreciation reviews and may trigger recapture or attribution liabilities. Administratively, the bill moves several technical settings from regulations or law to Commissioner determinations or Orders in Council, concentrating operational discretion in the Commissioner and Ministers.
More articles like this one.
A weekly email with all the latest developments on this topic.
What This Bill Actually Does
The bill adds a new method — the revenue account method (RAM) — for calculating income or loss from foreign investment fund (FIF) interests in certain circumstances. RAM is available only to defined classes of persons (RAM taxpayers and extended RAM taxpayers) and requires taxpayers to apply it consistently to all qualifying RAM interests.
RAM treats dividends as FIF income when received, but for disposals uses a specified net‑disposal formula that factors in disposal proceeds, acquisition cost, and foreign accruals and applies a 0.7 multiplier to that result. Deductions for RAM losses are ring‑fenced against RAM income and excess losses are carried forward as RAM loss balances to be applied against future RAM income.
The bill creates a clear non‑resident visitor category with objective tests: a natural person present for 275 days or fewer in a visit and present for 275 days or fewer in an 18‑month period, not resident immediately before arrival, lawfully present, not undertaking NZ‑sourced work for NZ residents, and tax resident or taxable abroad in a jurisdiction with substantially similar tax. Income derived in New Zealand by non‑resident visitors for qualifying services is exempt if it is also taxed abroad in a substantially similar way; the rules exclude public entertainers.
Related company and permanent‑establishment provisions carve out a host of visitor activities so short visits do not by themselves create NZ tax residence or PE exposure.On domestic employee benefits, the bill makes gift cards an express statutory category. Employers can choose to treat reimbursements for employee‑incurred benefit expenditure as either employment income or as an unclassified benefit; separately, gift cards are treated as fringe benefits unless the employer elects otherwise or the card is substitute remuneration aimed at defeating child support.
The law fixes a gift card’s taxable value as the amount loaded, changes attribution thresholds, and inserts cross references to several payroll/expenditure provisions to coordinate tax treatment and exemptions.The DI5 new investment asset regime is tightened and clarified. The bill updates the definition of new investment asset, treats certain expenditures (petroleum/mining development, specified land improvements) as assets for DI5, and replaces the old CC15 change‑of‑use rule with a new mechanism that triggers income to be returned when use shifts sufficiently (25% or more by the formula in the text).
If the deduction previously claimed exceeds the deduction that would be available after the change of use, the taxpayer must bring the difference into income and increase the adjusted tax value of depreciable property accordingly.Finally, the bill reshapes administration: it requires the Commissioner to publish information where the Acts require publication, creates a statutory process for regular disclosure of sensitive revenue information to specified government agencies under written Ministerial agreements (with Privacy Commissioner consultation and public disclosure of agreement terms), and shifts some technical interest‑rate and deemed‑rate settings to Commissioner determinations (employment‑loan interest, deemed FIF return rates, and use‑of‑money interest rates), replacing a number of regulations. There are also substantive GST changes to allow flow‑through joint venture elections and transitional rules for unincorporated bodies, and several tidy‑up and consequential amendments across the tax statutes.
The Five Things You Need to Know
The revenue account method's net‑disposal formula is (disposal proceeds − cost − foreign accruals) × 0.7, with an alternate time‑apportionment formula if market value cannot be obtained.
A person is a non‑resident visitor if their visit is 275 days or fewer (counting arrival and departure days) and they meet tests including prior non‑residency and being taxable abroad in a jurisdiction with substantially similar tax.
Employers that provide gift cards must treat the card's value as the amount loaded (RD 38B) and a fringe benefit arises unless the employer elects to treat the card as employment income under CE 1.
The DI5 change‑of‑use rule (new CC 15) triggers a recapture when a change in use reduces the DI5 deduction by 25% or more; the taxpayer returns the excess deduction as income and increases the asset's adjusted tax value.
Section 18HB permits ongoing disclosure of sensitive revenue information to named government agencies under a written Ministerial agreement; the agreement must be published (including classes of information and intended uses) and requires consultation with the Privacy Commissioner.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Annual income tax rates set for 2025–26
The bill fixes income tax for the 2025–26 year to the basic rates already specified in schedule 1 of the Income Tax Act 2007. Practically this is a housekeeping clause that keeps statutory rates aligned to the schedule rather than changing the rates themselves.
Revenue account method for FIFs: eligibility, calculation, and ring‑fencing
These provisions establish RAM as a restricted calculation method for FIF income and loss. EX 46B sets who may elect RAM (RAM taxpayers and extended RAM taxpayers), requires consistent application to qualifying RAM interests, and allows transitional and transferred‑interest exceptions. EX 56B sets how RAM treats dividends (recognised when received) and disposals (net‑disposal formula or time‑apportionment variant), defines foreign‑accrual adjustments for periods of non‑residence, and contains special rules for RAM treatment on departure, migration, and method changes. DN 8B and EX 59B impose ring‑fencing: RAM losses are limited to RAM income with any excess carried forward as RAM loss balances and applied against future RAM income.
Non‑resident visitor status and exempt income for short visits
YD 1B defines 'non‑resident visitor' with objective thresholds (275 days per visit and in an 18‑month window), work‑and‑family exclusions, and residency/citizenship tax tests. CW 22B and CW 22C create narrowly framed income exemptions for services performed during such visits or income that arises only because a non‑resident visitor is present — on the condition the income is taxed in a foreign jurisdiction with substantially similar tax. CW 22D supplies rules for edge cases when the foreign tax liability ceases during the visit, including an 'effective date' treatment.
Gift cards, reimbursements, and attribution of benefits
The bill inserts an employer election for reimbursements (CE 1BA) so reimbursements for employee‑incurred benefit expenditure may be treated as either employment income or an unclassified benefit. CX 16B makes gift cards explicit: a fringe benefit arises when employers provide gift cards unless the employer elects to treat the card as employment income; RD 38B fixes the value as the amount loaded. CW 17BA provides an exemption framework where the employer elects employment‑income treatment and ties to existing exempt‑income thresholds. RD 45 is amended to fold gift cards into the unclassified‑benefit rules and to clarify pooling, attribution thresholds, and related‑company interactions.
New investment asset (DI5) mechanics and change‑of‑use recapture
The bill clarifies and extends the DI5 new investment asset regime: it revises the DI2 application tests, expands DI4 definitions, introduces DI4B to treat specified types of expenditure (petroleum/mining development and certain improvements) as assets, and adjusts DI6 calculations to preserve correct cost bases for depreciation and intra‑group transfers. CC 15 is replaced with a precise change‑of‑use rule: if the deduction that would be allowable after a use change is less than the previously deducted DI5 amount by 25% or more (expressed by a formula), the taxpayer must include the difference in income and increase the asset's adjusted tax value.
Administrative powers, publication, disclosures, and interest determinations
Section 14H clarifies what 'publish' means for the Commissioner: information must be made publicly accessible (including on a departmental website). Section 18HB creates a controlled pathway for regular disclosure of sensitive revenue information to named government agencies under Ministerial agreements that require Privacy Commissioner consultation and public disclosure of agreement terms and classes of information. Several operational settings move from regulations to Commissioner determinations: employment‑loan interest under new 90B, the deemed rate of return for DE 55 under 91AAP, and the Commissioner’s/taxpayer’s paying rates under 120H. Those determinations are secondary legislation requiring publication.
Flow‑through joint ventures and GST treatment
The bill adds an elective flow‑through joint venture regime to the GST Act: ordinary joint ventures may elect to be treated as flow‑through joint ventures, causing supplies to be treated as divisible between members, imposing member registration rules, evidence and recordkeeping obligations, and special zero‑rating and liability provisions for supplies between members. Transitional rules let registered joint ventures and certain unincorporated bodies opt in with effective dates and notification requirements.
This bill is one of many.
Codify tracks hundreds of bills on Finance across all five countries.
Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Returning residents and certain natural persons with pre‑residence overseas shareholdings: RAM provides an alternate FIFO‑style accounting method that can simplify recognition of dividends and provide clearer disposal rules (including formulaic treatment of foreign‑accrual adjustments).
- Short‑term visitors and their foreign payers: the non‑resident visitor carve‑out can exempt qualifying earnings from New Zealand tax if those earnings are taxed abroad in a substantially similar way, reducing compliance for cross‑border consultants, contractors and visiting experts.
- Employers and employees using gift cards carefully: the statutory clarity on gift‑card valuation and the employer election for reimbursements lets employers choose a predictable payroll approach and, in some cases, access exempt‑income thresholds to reduce withholding or fringe implications.
- Unlisted companies and employees using employee share schemes: EA 4B lets employers designate certain unlisted employee shares as 'employee deferred shares' so tax crystallises at a liquidity event, deferring employee tax and potentially aligning cash flows with exit events.
- Joint venture members who adopt flow‑through treatment: the GST flow‑through option reduces GST layering for arrangements that deliver discrete benefits to members, allowing separate input tax positions and simpler intra‑venture accounting when members agree on apportionments.
Who Bears the Cost
- Taxpayers with FIF exposures who are not eligible for RAM or who change methods: method changes, deemed disposals, market valuations, and ring‑fencing can trigger immediate tax events and administrative valuations that are costly and technically demanding.
- Inland Revenue (policy and privacy teams): section 18HB creates an obligation to negotiate Ministerial agreements, consult the Privacy Commissioner, and publish details, increasing internal workloads and requiring robust safeguards and audit arrangements.
- Employers and payroll teams: treating gift cards, reimbursements, and attribution thresholds consistently will require updated payroll processes, recordkeeping, and potentially additional pay‑period reporting or grossing adjustments.
- Advisers and accountants: multiple transitional rules, market‑value requirements, and the new RAM/time‑apportionment formulas will generate advisory demand, model rework and updated tax‑return logic.
- Small entities claiming DI5 or dealing with DI6 interactions: the change‑of‑use recapture and adjusted tax‑value adjustments can create unexpected taxable income and complexity when asset use shifts among business and private purposes.
Key Issues
The Core Tension
The central dilemma is choice and flexibility versus complexity and administrability: the bill gives taxpayers new elective paths (RAM, deferred employee shares, flow‑through joint ventures) and provides the Commissioner with discretionary technical tools (determinations and disclosure agreements) intended to modernise and simplify outcomes, but each choice shifts compliance burdens, valuation difficulties, and privacy or revenue‑certainty risks onto taxpayers, advisers, and Inland Revenue — resolving those trade‑offs requires detailed guidance, systems changes, and careful transitional handling.
The bill packs many technical changes into one instrument, producing several implementation frictions. RAM can simplify measurement for some taxpayers but depends on consistent elections, reliable market valuations, and precise foreign‑accrual calculations; where market values are unavailable the alternate time‑apportionment formula applies, but that introduces day‑counting complexity and potential disputes about ownership and FIF periods.
The ring‑fencing rules limit immediate deductibility of RAM losses and create a new class of carried losses (RAM loss balance) that must be tracked separately from conventional FIF or tax losses.
The non‑resident visitor carve‑out aims to reduce distortions for short visits, but it creates sharp border cases tied to foreign tax systems — taxpayers and administrators must compare 'substantially similar tax' regimes, and the rules rely on facts (lawful presence, family scheme entitlements, and the nature of services performed) that are easy to misclassify. That creates taxpayer uncertainty and potential for inadvertent under‑ or over‑reporting.
Similarly, permitting regular disclosures of sensitive revenue information to government agencies (under 18HB) raises privacy and voluntary‑compliance trade‑offs: safeguards and publication mitigate risk but do not eliminate re‑identification or mission‑creep concerns.
Operationally, the bill shifts many technical settings to Commissioner determinations (interest rates, deemed rates) and to Minister‑recommended Orders in Council for FamilyBoost parameters. That increases administrative flexibility but reduces legislative specificity and may shorten consultation timelines.
The flow‑through joint venture GST option is helpful where members truly receive discrete outputs, but the election requires written agreement on apportionment and robust recordkeeping — otherwise members face disputes and audit exposure. Finally, the DI5 change‑of‑use calculation is formulaic but will require taxpayers to maintain precise evidence of business use percentages over time to avoid or substantiate recapture events.
Try it yourself.
Ask a question in plain English, or pick a topic below. Results in seconds.