EY Tax Monthly News Update – Edition 7, 2025

EY Tax News Update: Edition 7, 2025

Welcome to the latest edition of EY’s tax news. This edition covers key tax developments for August 2025. You can also find details of upcoming EY Global webcasts, along with links to EY insights.

In brief

Inland Revenue updates

• Don’t miss your chance to have your say on current draft consultation items:
  • Public private partnership projects and business continuity test for losses
  • Whether the purchase price allocation rules alter the tax book values of Farmland Improvements and listed horticultural plants
  • Whether a farmer who leases land can deduct the tax book value of horticultural plants on the land when the lease ends
  • GST – meaning of payment; secondhand goods input tax deduction; taxable activity
  • Whether and when a taxpayer is carrying on a “business” for income tax purposes

• Stay on top of new finalised guidance:
  • Interpretation Statement: whether money or property received by New Zealand tax residents from overseas is income from a foreign trust
  • Questions We’ve Been Asked: GST listed services rules
  • General Article: tax on any fees paid to a member of a board, committee, panel, review group or task force
  • Technical Decision Summaries: sale of intellectual property, shares and ongoing provision of services; company restructure for commercial and estate planning; transfer of property between charitable trusts; omitted income and shortfall penalty
  • Other: Foreign Investment Fund Determination
    

• Simplification measures for transfer pricing
• Other updates

Government and other updates

• New Tax Bill proposes compliance simplification measures and many other changes
• Treasury’s Long-term Insights Briefing
• Other updates, including change to rate of interest that applies to low-interest employment-related loans for fringe benefit tax purposes 

International updates

• Australia, including PepsiCo decision and Productivity Commission proposals
• United States
  

EY Global webcasts

• Women in Tech series: How branding builds impact in the tech world
• How businesses can thrive under the Trump Administration’s evolving trade policies
• The 'One Big Beautiful Bill Act': Key international tax provisions

EY insights    

• Tax Guides – various tax matters covering over 150 jurisdictions
• G20 Finance Ministers meeting communiqué includes international tax section
• OECD releases update of Pillar Two Administrative Guidance on the Central Record of Legislation with Transitional Qualified Status
• How to build loyalty in the new era of marketing
• How to master the great supply chain reset
  

Current draft consultation items 

New finalised guidance

Inland Revenue guidance items finalised since our last update include:

Simplification measures for transfer pricing

Effective from 1 July 2025, Inland Revenue has updated its simplification measures for cross-border associated party loans with a total principal of up to NZ$10 million. The indicative margin has been increased from 1.75% to 2.5% over the relevant base indicator. Transactions that align with this simplification measure are considered by Inland Revenue to pose low transfer pricing risk and therefore do not require detailed benchmarking.

This update is designed to ease compliance for businesses engaged in low-risk transfer pricing arrangements. The next review of the rates is expected to take place in June/July 2026. See Inland Revenue’s website here for details and reach out to your usual EY tax advisor with any questions.

Other updates

Other Inland Revenue updates include:

• Inland Revenue’s Tax Counsel Office has finalised its public guidance work programme for 2025-26. Twenty new projects have been added, and 45 projects have been carried over from earlier years. The work programme is available on Inland Revenue’s Tax Technical website here.

• The deemed rate of return on attributing interests in foreign investment funds has been set at 8.04% for the 2024-25 income year (a decrease of 0.59% from the previous income year). The new rate came into force on 25 July 2025. See Inland Revenue’s website here.

New Tax Bill proposes compliance simplification measures and many other changes

The Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill (Bill) was introduced on 26 August 2025 and proposes significant tax reforms.

Changes to the foreign investment fund (FIF) regime

The Bill proposes a new optional “revenue account method” that would allow eligible taxpayers to calculate the FIF income of certain foreign investments on a realisation basis. Under the new method, New Zealand taxation would apply only to dividends received and a proportion of realised gains or losses on disposal.

These amendments are proposed to apply from 1 April 2025 to individuals who became tax resident in New Zealand on or after 1 April 2024. The person must have been non-resident for at least five years before becoming New Zealand tax resident. Transitional residents and family trusts may also be eligible in some cases.

The revenue account method would broadly be available in relation to:

• Unlisted shares in a foreign company that were acquired before the person became New Zealand tax resident
• All foreign shares where the person is concurrently liable for tax in another country on the disposal of the shares on the basis of their citizenship or a right to work and live in that country, provided New Zealand has a tax treaty with the other country

Other eligibility criteria and requirements would also apply, and specific rules would cover circumstances where the individual has multiple entry and exit points – including rules that would, in some cases, apply a deemed disposal.

Digital nomads and remote workers

Amendments are proposed to allow “non-resident visitors” working remotely to stay longer in New Zealand before triggering certain tax obligations. The changes are proposed to apply to visitors arriving in New Zealand on or after 1 April 2026.

The new rules would also limit the impact of the visitor’s New Zealand presence for determining the tax residence of their foreign employer or associated entities (for example when the visitor is a company director). The visitor’s presence would therefore not trigger tax obligations under the “centre of management” or “director control” rules of corporate tax residency, and the activities of the visitor would be disregarded when determining whether a non-resident enterprise has a permanent establishment in New Zealand.

Other changes

A wide array of other changes are also proposed, including:

• Amendments relating to GST and unincorporated joint ventures
• Employee share scheme changes intended to help the start-up sector
• A new income tax exemption for residential supply of excess electricity sold to the national grid
• Repeal of the trust disclosure provisions, which is expected to provide Inland Revenue with additional flexibility when designing the ongoing information disclosure requirements for trustees
• Retrospective remedial amendments intended to clarify the scope of the recently introduced Investment Boost accelerated tax depreciation deduction
• Changes to the fringe benefit tax (FBT) rules, but no wholesale reform of the FBT regime
• An increase in cash-basis person thresholds for the financial arrangements rules
• Several other changes and remedial amendments

Implications

The Bill now awaits its first reading in Parliament and referral to the Finance and Expenditure Select Committee for public submissions. It is expected to be enacted by 1 April 2026, although the proposals are subject to change during the Parliamentary process.

The changes will be welcome news for many. For eligible new migrants to New Zealand the new revenue account method will relieve cashflow concerns imposed by the current FIF regime.

In addition, employers looking to allow flexible working arrangements for their staff will be pleased to see the new “non-resident visitor” rules. The growth in mobile working globally can at times trigger complex taxation consequences for employers, remote workers and business entities. New Zealand will be providing some additional flexibility in recognition of the modern ways of working, ensuring employers and visitors have clarity as to their New Zealand tax obligations.

For further information, refer to the EY Global Tax News Alert here, or reach out to your usual EY tax advisor.

Treasury’s Long-term Insights Briefing

The Treasury has published its 2025 Long-term Insights Briefing (LTIB). The LTIB brings together insights from economic cycles and shocks faced by New Zealand over recent decades. It includes options for how fiscal policy can support economic resilience and the associated trade-offs.

The LTIB finds there is room to improve the approach to managing the “public purse” and better balance debt from harder times with savings from better times.

Other updates

Other updates include:

• The rate of interest that applies to low-interest employment-related loans for FBT purposes is decreasing again, this time from 7.38% to 6.67%. The new rate applies from the quarter beginning 1 July 2025, and the relevant regulations came into force on 21 August 2025. See the Income Tax (Fringe Benefit Tax, Interest on Loans) Amendment Regulations (No 2) 2025.
• The Government has announced significant legislative changes to transition New Zealand’s light vehicles from petrol tax to electronic road user charges which are based on distance and weight. Further information is available in the Beehive release here. 

Australia

High Court dismisses Commissioner's appeal in PepsiCo: No royalties under arm's-length contract absent express provision for royalties

On 13 August 2025, the full bench of the High Court of Australia (High Court) delivered its long-anticipated judgment in Commissioner of Taxation v PepsiCo Inc [2025] HCA 30. The High Court, by majority, found that a royalty did not exist where the agreement did not expressly provide for a royalty. The majority also found that the Australian diverted profits tax did not apply as there was no tax benefit in connection with a scheme.

The decision has potentially significant implications for the Australian Taxation Office's (ATO's) interpretation of royalties. The ATO has issued a statement indicating they are considering the decision and any broader impact it may have on the reasoning set out in Draft Taxation Ruling TR 2024/D1 (Income tax: royalties – character of payments in respect of software and intellectual property rights). It is also possible that the ATO's Draft Practical Compliance Guideline PCG 2025/D4 (Low-risk payments relating to software arrangements – ATO compliance approach) may be amended to reflect the decision.

For further information on the decision and its potential implications, refer to the EY Global Tax News Alert here.

Productivity Commission interim report proposes net cashflow tax

The Australian Productivity Commission has released an interim report on creating a more dynamic and resilient economy, with a focus on corporate tax reform. The report proposes cutting the corporate tax rate to 20% for companies with revenue below AU$1 billion and introducing a new 5% net cashflow tax on all companies. The new 5% cashflow tax would apply on top of existing corporate tax, and while it would allow cost of capital to be immediately written off, it would deny interest deductions incurred in relation to capital expenditure.

The interim report is available on the Australian Productivity Commission website here, with public submissions open until 15 September.

United States

The following EY Global Tax News Alerts are available:

• US suspends duty-free de minimis treatment for low-value shipments (see here)
• US imposes additional tariffs on imports from trading partners (see here)
• US imposes tariffs on copper products (see here) 

• Women in Tech series: How branding builds impact in the tech world – register here
• How businesses can thrive under the Trump Administration’s evolving trade policies – watch on demand here
• The 'One Big Beautiful Bill Act': Key international tax provisions – watch on demand here

Refer to the below guides, thought leadership articles and regular newsletters available on ey.com:

• Tax Guides – browse our in-depth guides covering corporate tax, indirect tax, personal taxes, transfer pricing and other tax matters in more than 150 jurisdictions
• G20 Finance Ministers meeting communiqué includes international tax section
• OECD releases update of Pillar Two Administrative Guidance on the Central Record of Legislation with Transitional Qualified Status
• How to build loyalty in the new era of marketing
• How to master the great supply chain reset
  

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