Tax Talk: Spring 2026

One of the most significant proposed changes in the Bill is an overhaul of the FBT rules for motor vehicles. The new regime is proposed to apply from 1 April 2027 and is intended to provide a “set and forget” approach. Instead of tracking vehicle availability day-by-day, employers would generally classify vehicles into categories based on the level of private use and apply a prescribed percentage. 

EVs and hybrids will also be taxed at lower FBT rates. 

As with most simplifications, there will be winners and losers, and some pain involved in the transition. However, this could significantly reduce record-keeping requirements (no logbooks!), which is worth something even for those facing higher FBT costs.  

As always, the devil is in the detail, so businesses with vehicles currently relying on work-related vehicle exemptions (such as for double cab utes) should review the proposed categories.

The most widely relevant change is an increase in the FIF de minimis threshold from $50,000 to $100,000. This change is proposed to apply from 1 April 2026 and would mean more investors can hold overseas shares without being subject to calculating income under the FIF regime. That said, some taxpayers who fall below the new threshold may still be better off choosing to apply the FIF rules, particularly where their investments have performed strongly. 

The Bill would also expand access to the Revenue Account Method (RAM). These changes are also proposed to apply from 1 April 2026 and would allow all NZ residents with qualifying unlisted foreign shares (or in the case of US citizens, all shares) to be taxed largely on realised gains (in the nature of a capital gains tax), aligning the tax liability with a cash flow on sale. 

The Bill contains further changes designed to make NZ more attractive to internationally mobile individuals. 

Proposals include simplified foreign currency financial arrangement rules, the ability for certain individuals to calculate income in foreign currencies, and exemptions for a range of common personal foreign currency arrangements such as overseas bank accounts and mortgages. These proposals would apply from 1 April 2027.

The rule regarding overseas-denominated arrangements in particular could be a significant compliance and tax saving for some, as it means they are generally no longer exposed to income tax on annual foreign exchange rate movements. 

These movements can sometimes give rise to large taxable gains or losses without any cash being received, particularly during periods of significant exchange rate volatility around year-end (post-Covid being a notable example), and can produce tax outcomes that bear little resemblance to a taxpayer’s actual economic position. 

Under the proposed rules, these unrealised foreign exchange movements can largely be ignored, with the tax impact generally arising only when the arrangement is realised (for example, on bond maturity). 

The Bill would expand the ability to claim GST on certain assets and expenses acquired before GST registration. This could benefit businesses that only recently exceeded the registration threshold. 

In addition, following the recent change making surplus electricity exported to the grid from residential premises income tax-free, such supplies will now also generally be zero-rated for GST purposes. 

Realistically, it is unlikely that many GST-registered people were returning this income to begin with, so this is really just legalising common practice.  

These changes are all proposed to take effect from 1 April 2027.

One proposal that trustees should be aware of applies when beneficiary income is allocated to tax-exempt beneficiaries. 

Under the proposal, income allocated to charities and other tax-exempt beneficiaries needs to be paid into the beneficiary’s bank account within a specified period or risk being taxed as trustee income at 39%.  

However, this is not proposed to come into effect until the 2029 income year (i.e. 1 April 2028 for a standard 31 March balance date).