New Zealand has introduced a Bill to implement measures from the 2026/27 Budget, proposing changes to the R&D tax incentive, foreign investment fund rules, GST, FBT and other areas of the tax system.
New Zealand’s Minister of Revenue has introduced the Taxation (Annual Rates for 2026–27, FBT Simplification, Foreign Investment Funds, and Remedial Measures) Bill into Parliament, proposing changes to tax legislation to implement measures announced in Budget 2026/2027.
Introduced on 10 September 2026, the Bill proposes changes to the Foreign Investment Fund (FIF) rules, Fringe Benefit Tax (FBT), Goods and Services Tax (GST), the Research and Development Tax Incentive (RDTI), tax administration, and other areas of the tax system.
Research and development tax incentive
The Bill proposes an in-year advance payment scheme under the RDTI, allowing approved taxpayers to receive quarterly payments equal to 15% of estimated eligible expenditure, subject to a cap of 80% of the estimated total credit and a labour-related cap. Payments would be reconciled at year-end.
The Commissioner would receive discretion to extend filing deadlines or accept late amendments where failures resulted from genuine mistakes or events outside the taxpayer’s control.
The internal software development expenditure cap would be reduced from NZD 25 million to NZD 3 million per income year. Mineral, petroleum, gas and geothermal prospecting, exploration and drilling would also be excluded from qualifying R&D activities.
Foreign investment fund rules
The Bill proposes several changes to the FIF regime aimed at reducing compliance costs and removing tax barriers for New Zealand residents with offshore investments.
The FIF de minimis threshold would increase from NZD 50,000 to NZD 100,000 of cost price, with the change applying from 1 April 2026. Investors whose offshore investments remain below the threshold would not be required to apply the FIF rules.
Eligibility for the Revenue Account Method (RAM) would also be expanded. The method, which taxes 70% of realised gains together with actual dividends received, would become available to all New Zealand residents holding unlisted foreign shares, rather than only recent migrants. Residents who are also subject to tax in another jurisdiction because of citizenship or work rights would be able to use RAM for both listed and unlisted foreign shares.
The Bill would extend the RAM exit tax to cases where an individual becomes non-resident under a double tax agreement (DTA), with the change applying from 1 April 2027. Taxpayers switching out of RAM would also have to remain outside the method for five years before being able to return.
Other FIF proposals would allow active investors, founders and key employees to continue using the Attributable FIF Income (AFI) method when their interest falls below 10% during business expansion. The Bill would also clarify eligibility for the 10-year FIF exemption when an acquired business subsequently lists offshore.
For unlisted FIF shares without a readily available market value, taxpayers would be able to choose the cost method, while the Fair Dividend Rate (FDR) and Comparative Value (CV) methods would remain available for listed shares.
Cryptoassets, banking and tax administration
The Bill proposes a share-lending-style cost-base preservation rule for certain decentralised finance (DeFi) cryptoasset-lending transfers. The measure would apply to arm’s-length transfers of one year or less and is intended to prevent temporary transfers from creating an interim tax point.
Qualifying fiat-pegged stablecoins, where the peg remains within a 2% variance, would be excluded from the revenue account rule for personal property acquired for disposal.
For banking groups, the thin capitalisation equity thresholds would increase to 12% for foreign-owned domestic systemically important banking groups and 11% for other banking groups. The thresholds would be linked dynamically to changes in the Reserve Bank’s countercyclical capital buffer.
The Bill would also provide legislative authority for Inland Revenue to use automated systems for high-volume, rules-based decisions. Their use would be subject to a mandatory operational standard, which would be reviewed every three years.
Other proposed measures include new statutory categories and integrity rules for Digital Services Providers and Bookkeepers, as well as rules setting the tax cost base of non-monetary redress assets transferred under Treaty settlement legislation at market value at the time of transfer.
FBT and motor vehicle rules
The Bill proposes to simplify the FBT rules applying to motor vehicles by removing several existing tests and calculations.
These include the “made available” test, 24-hour periods, test periods and the statutory “work-related vehicle” definition. The existing formulas would be replaced by a schedule setting out private-use categories from 100% to 0%, alongside revised valuation rates for petrol/diesel, hybrid and electric vehicles.
Certain business-use categories would also be subject to permanent exterior branding requirements. Exceptions would apply to certain existing vehicle leases and purchases, non-widely-held farming businesses and cases where the Commissioner grants a waiver for sensitive operations.
The Bill would formally exempt emergency vehicles operated by police, fire, ambulance, defence force, civil defence and accredited volunteer organisations from FBT.
GST reforms
A new Subpart 3A would be inserted into the GST Act to establish a unified framework for correcting return errors, supply errors and supply inaccuracies.
Minor errors falling within the proposed small-value threshold could be corrected in a subsequent return. The threshold would be the lower of NZD 10,000 or 5% of total supplies / NZD 1,000, as applicable.
The Bill would also introduce Section 20BA, allowing input tax deductions for goods and services acquired before GST registration once they begin being used in a taxable activity.
Other GST changes would clarify that non-resident suppliers working at clients’ premises in New Zealand would not establish a fixed or permanent establishment solely because of those premises. Supplies of electricity generated at or connected through residential installation control points and supplied to retailers would also be zero-rated.
Non-resident contractors’ tax and financial arrangements
The monetary withholding exemption threshold for Non-Resident Contractors’ Tax (NRCT) would increase from NZD 15,000 to NZD 75,000 per contract over a 12-month period. The proposed rules would apply a single-payer approach to both monetary and 92-day thresholds.
Low-risk contractors that had been registered in New Zealand for at least 24 months would also be excluded from NRCT.
For financial arrangements, the portfolio threshold for using the straight-line calculation method would rise from NZD 1,850,000 to NZD 3 million.
The Bill would introduce an elective regime allowing natural persons and complying trusts to calculate financial arrangements in foreign currency. It would also provide relief for “quarantined foreign financial arrangements” where individuals are taxed overseas under a DTA.
Not-for-profits, charities and KiwiSaver
The proposed measures would retain the non-taxable treatment of membership subscriptions and levies for not-for-profits. The tax deduction available to small not-for-profits would increase from NZD 1,000 to NZD 10,000, while organisations with net income of NZD 10,000 or less would not be required to file income tax returns.
Volunteer honoraria could also be treated as salary or wages.
The Bill would repeal the income tax exemption for foreign charities receiving New Zealand investment income without registration under the Charities Act 2005, with the change applying from 1 April 2028.
Donors would be able to claim and receive refunds for charitable tax credits during the tax year rather than waiting until year-end. The proposals would also allow 16- and 17-year-olds with estranged guardians to enrol in KiwiSaver alongside an Unsupported Child’s Benefit caregiver.
The measures will now progress through the parliamentary legislative process.
