Tax Talk: Spring 2025

This one’s a big deal if it applies to you. The new Revenue Account Method (RAM) lets eligible taxpayers ignore the usual FIF rules (FDR/CV) and instead just pay tax on actual gains when they sell the shares – and even then, only on 70% of the gain.

To qualify:

• The shares must be unlisted and have no option to redeem for market value.
• You must have acquired them before becoming NZ tax resident (after 1 April 2024), and have been non-resident for at least 5 years before you arrived here
• Trusts can qualify in some cases (based on the primary settlor meeting the criteria)

There’s a further concession for taxpayers who are taxed in another jurisdiction based on citizenship or a right to work – mainly relevant to US citizens. These taxpayers can use RAM for all shares, even listed ones.

There’s a fair bit of detail around eligibility, cost base rules, and what happens if you leave NZ again – but the short version is: if you’re a recent migrant with offshore private company shares, this could be a very welcome change.

Again, watch this space.

This is particularly big for the startup space who, often being cash-poor, incentivise their employees by offering shares to compensate for less-competitive salaries through what are known as Employee Share Schemes (ESS).

The downside of these schemes is that currently, being issued shares because of your employment means you have taxable income equal to the value of the shares. This can be a big problem, since employees often can’t sell the shares to pay their tax bill (which is based on a nominal value that may or may not ever be realised).

Now, some relief is in sight.

From 1 April 2026, where the company and employees agree, they can opt into a new regime that defers the taxing point until a “liquidity event” occurs – i.e. when you can actually realise value from the shares. A liquidity event is:

• Listing of the company
• Sale or cancellation of the shares
• Payment of a dividend

While optional, it offers the chance to put off a big tax bill until there’s cash to pay it.

I admit, this one surprised me, mainly because I’d never thought about it. But it makes sense – if you’re getting paid for exporting electricity to the grid, that’s income to you and in theory, you should be paying tax on it (although you could be running a loss-making activity after accounting for depreciation of the solar system).

I’d be really surprised, however, if more than one person in 100 has been including this in their tax return.

Like a few other things in this tax bill, the proposal is aimed at aligning the law with what people are already doing. This means income from selling excess electricity generated at a residential dwelling will be exempt from tax.

There’s a “but”, however. If a trust owns the dwelling, they’re not exempt, meaning they should be returning the income. This might come as a shock to some – and don’t assume Inland Revenue won’t find out.

A significant portion of trustees and accountants will be celebrating the demise of the compliance-heavy trust disclosure rules.

However, part of the justification of getting rid of these rules is that Inland Revenue already has broad information collecting powers. So, while the formal rules are going, it’s entirely possible that some elements of them may be retained, whether as part of the trust tax returns or outside them.

A new “non-resident visitor” status is being introduced from 1 April 2026. It’s aimed at remote workers who want to spend time in NZ without triggering tax residency and aligns the period of non-tax-residency with the longest period normally granted under a visitor visa.

To qualify, you must:

• Spend no more than 275 days in NZ in an 18-month period
• Not work for a NZ employer or sell to NZ customers
• Be tax resident in another country with a comparable income tax system

If you qualify, you shouldn’t be taxed in NZ on your foreign income , and your presence is less likely to trigger NZ tax residency for any offshore company or trust either.

One caveat though – if you have a permanent place of abode in NZ, you’ll be tax resident here regardless of whether you meet the non-resident visitor criteria. In other words, you may need to be genuinely nomadic.

It will make NZ a more attractive option for digital nomads, which is a win for them (and the cafes they work from). And no doubt a few will fall in love with NZ (who wouldn’t?) and stay longer.

Unless you’re a tax nerd, the recent controversy over so-called open loop gift cards, probably never came onto your radar. Open loop gift cards are basically pre-loaded credit cards that can be used anywhere with an EFTPOS terminal. They are often loaded with credit through qualifying purchases with trade suppliers.

Employers who gave employees such cards as gifts should have been returning these as akin salary and wages and subject to PAYE deduction, since Inland Revenue views such cards as cash.

This was news to most employers, and unpopular since processing them via the PAYE system is much more work than returning it via the FBT system.

The bill proposes to fix that so employers will be able to treat open loop cards as fringe benefits. Which they were largely already doing.

Without getting too technical, the Financial Arrangement rules require you to “spread” notional income you are deemed to “accrue” over the life of certain investments. These rules are complex, but if you are a “cash basis person”, you can ignore them and you only return income received (e.g. cash interest).

Being a cash basis person is generally a good thing. However, the thresholds for being a cash basis person haven’t moved for decades.

The proposed changes intended to take effect from 1 April 2026 are:

• The “variable principal debt instrument” threshold (which is generally to determine whether the financial arrangement rules apply to bank chequing, savings, and similar accounts) increases from $50,000 to $100,000.
• The “income and expenditure” threshold (as calculated under the financial arrangement rules) increases from $100,000 to $200,000.
• The “absolute value” threshold for all financial arrangements held (both assets and liabilities) increases from $1 million to $2 million.
• The “deferral” calculation threshold (for the difference in tax between cash basis and accruals basis) increases from $40,000 to $100,000.

This should bring a lot more people back within the simplified rules – and reduce the number of workpapers we need to complete with your annual tax return.