New Taxation Bill Introduced - Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill

The New Zealand government recently introduced the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill, a wide-ranging package designed to attract talent, simplify compliance, and improve employee outcomes.

Key updates include:

• Digital Nomads: From 1 April 2026, overseas visitors can live and work in New Zealand for up to 275 days within an 18-month period without paying NZ income tax - provided they are not employed by a NZ-based business.  The tax rules have now come in to play to keep things consistent and to clarify that non-resident visitors that undertake remote work will also not be regarded  as a NZ tax resident if they live 275 days in NZ over an 18 month period with any of the remote income earn by these type of persons non-taxable in NZ. This would only apply to individuals who arrive in New Zealand from 1 April 2026. 
   
• Foreign Investment Rules for Migrants: A new Revenue Account Method (RAM) provides eligible migrants with a simplified method for calculating tax on their foreign share investments. . This should particularly benefit US migrants and returning residents. Refer our earlier published article here. 
   
• Trust Disclosures: The Government is proposing to repeal sections 59BA and 59BAB of the Tax Administration Act 1994, which currently set out minimum disclosure requirements for domestic trusts, including rules around financial statements.
   
• IR Information Gathering Powers: The Bill also seeks to repeal a provision in the Tax Administration Act 1994 which currently allows Inland Revenue the ability to collect data for tax policy development such as research into high-net-worth individuals. This repeal will protect taxpayers' privacy by limiting Inland Revenue's information gathering powers. 
  
  According to the Commissioner,  Inland Revenue holds sufficient statutory powers to obtain the information it needs without relying on these sections.
   
• Open loop cards (FBT vs PAYE): Earlier this year, Inland Revenue released QB 25/07 addressing the tax treatment of gift cards, including open loop cards provided to employees. The Commissioner initially viewed these as subject to PAYE, given their similarity to cash.
  
  However, the latest Bill proposes giving employers the discretion to apply either the PAYE or FBT regime for open loop cards provided from 16 April 2025. Inland Revenue has confirmed in recently released OP 25/02 that it will not review employer compliance with the earlier position for the 2025–26 PAYE year, provided FBT has been correctly returned.
   
• Employee Share Schemes: Unlisted companies can now choose to delay the taxing point on employee shares until a liquidity event (such as an IPO, sale, or dividend), reducing cashflow strain on staff and better aligning tax with realised value.
   
• Excess electricity sold back to the grid: Income from selling surplus residential solar electricity will be tax-exempt, although deductions for related expenses will no longer be allowed. Any corresponding expenses will be non-deductible. Note that this won't apply to operational farms. 
   
• KiwiSaver Changes: Mandatory employer contributions will rise to 3.5% in 2026 and 4% in 2028, while employees can choose to maintain contributions at 3%.
   
• SaaS Clarification: Software-as-a-Service provided from offshore will be formally excluded from non-resident contractors’ tax (NRCT), unless NZ-based infrastructure or personnel are involved, ending long-standing uncertainty around the application of NRCT to SaaS payments.

The proposed tax bill reflects a broader strategy to simplify compliance, support business growth, and attract global talent. By removing outdated rules, easing tax burdens, and creating a more welcoming environment for skilled migrants and remote workers, the Government aims to foster a stronger, more dynamic economy for all New Zealanders.