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EY Tax News Update: Edition 1, 2025
Welcome to the first edition of EY’s tax news for 2025. This edition covers key tax developments for December 2024 and January 2025. You can also find details of upcoming EY Global webcasts, along with links to EY insights.
In brief
Inland Revenue updates
- Current draft consultation items:
- Employee share scheme timing issues for start-up companies
- Cash collateral is “money lent”
- Income tax and GST – industries other than forestry registered in the Emissions Trading Scheme
- Can section CB 3 apply to amounts derived from the disposal of land?
- New finalised guidance, including:
- Interpretation Statements: share investments; income tax and FBT for travel by motor vehicle between home and work; identifying the relevant item of property for depreciation purposes
- Technical Decision Summaries: depreciation loss on asset no longer used; share scheme taxing date; sale of leasehold interests in residential and commercial units
- Determination: Amortisation Rates for Listed Horticultural Plants
- Two new Product Rulings
- Changes being considered to Foreign Investment Fund rules
- Increased compliance activity
- Decrease in use-of-money interest rates
- Other updates
Government and political updates
- Consultation on strengthening New Zealand’s Capital Markets
- Reforms to the science and innovation sector
- Economic update
- Other updates
International updates
- Australia
- United States
- United Nations
EY Global Webcasts
- 2025 Geostrategic Outlook: How geopolitics is driving transformation
- BEPS 2.0: OECD guidance and geopolitical impact
EY Insights
- Tax Guides – various tax matters covering over 150 jurisdictions
- Top 10 geopolitical developments for 2025
- How will climate transition planning empower you to shape the future?
- EU Deforestation Regulation now postponed by 12 months
- Italy approves significant changes to the Digital Services Tax
- OECD releases new documents on GloBE rules and on qualified jurisdiction status
- OECD releases new documents on GloBE Information Return
- Pillar One Update from Co-chairs of Inclusive Framework on BEPS
- The Latest on BEPS and Beyond | December 2024 | January 2025
Inland Revenue updates
Current draft consultation items
|
Consultation item type |
Description |
Public consultation closes |
|---|---|---|
|
Consultation on employee share scheme timing issues for start-up companies |
Inland Revenue is consulting on a policy proposal in relation to timing issues for the taxation of employee share schemes offered by start-up companies.
The proposal suggests deferring tax for eligible schemes, as well as the company's deduction, until a liquidity event occurs to fund the tax on income. |
14 March 2025 |
|
Draft Operational Statement
|
Outlines a change of view by the Commissioner on whether cash collateral provided as part of security lending and derivative transactions is “money lent” and the resident and non-resident withholding tax obligations on interest payable on the cash collateral. |
28 February 2025 |
|
Draft Interpretation Statement PUB00493: Income tax and GST - industries other than forestry registered in the Emissions Trading Scheme |
Applies to industries registered in the Emissions Trading Scheme (excluding forestry) and:
|
27 February 2025 |
|
Draft Question We’ve Been Asked |
Considers whether s CB 3 of the Income Tax Act 2007 can apply to amounts derived from the disposal of land. Section CB 3 provides that an amount derived from an undertaking or scheme for the purpose of making a profit is income of a person. |
14 February 2025 |
New finalised guidance
Inland Revenue guidance items finalised since our last update include:
|
Finalised guidance name |
Description |
|---|---|
|
Interpretation Statement IS 24/10: Income tax – Share investments |
Provides guidance on tax obligations for individuals who invest in shares. Covers when an investor will have a tax liability for dividends, share sales and attributing interests in foreign investment funds (FIFs).
Accompanying fact sheets include information on: |
|
Interpretation Statement IS 25/01: Income tax - deducting costs of travel by motor vehicle between home and work |
Considers who can claim income tax deductions for expenditure on travel by motor vehicle between home and work under the specific deductibility rules for motor vehicle expenditure, and in what circumstances. Accompanied by a fact sheet. |
|
Interpretation Statement IS 25/02: FBT – travel by motor vehicle between home and work |
Considers when employer-provided travel by motor vehicle between home and work is a fringe benefit subject to FBT, but generally does not consider the situation where an employer helps cover the cost of private travel between home and work in the employee’s own vehicle. Accompanied by a fact sheet.
It is important to note that some aspects of the FBT regime may change as a result of the current FBT review being undertaken by Inland Revenue’s Policy team. |
|
Interpretation Statement IS 25/03: Income tax - identifying the relevant item of property for depreciation purposes |
Provides general guidance on how to identify the relevant item of property for tax depreciation purposes. This is important to ensure the item is a depreciable item and to determine the applicable depreciation method and rate. Accompanied by a fact sheet. |
|
Technical Decision Summary TDS 24/23: Depreciation loss on asset no longer used |
Summarises a decision of the Tax Counsel Office in relation to a private ruling which considered whether the taxpayer had an amount of depreciation loss on an asset no longer able to be used in the business due to a change of business direction. |
|
Technical Decision Summary TDS 24/24: Share scheme taxing date |
Summarises a decision of the Tax Counsel Office in relation to a private ruling which considered when the share scheme taxing date arose under a certain employee share scheme. |
|
Technical Decision Summary TDS 25/01: Sale of leasehold interests in residential and commercial units |
Summarises a decision of the Tax Counsel Office in relation to a private ruling involving land development and a limited partnership with a Portfolio Investment Entity (PIE) as the majority limited partner. The issues included whether certain assets and income fell within the permitted investments and permitted income categories under the PIE rules. |
|
Determination DET 24/04: Amortisation Rates for Listed Horticultural Plants |
Acknowledges Mānuka as a listed horticultural plant for tax purposes (provided certain requirements are met). |
|
Other items |
Product Rulings: BR Prd 24/04; BR Prd 24/05 |
Changes being considered to FIF rules
Inland Revenue has recently consulted on proposed policy changes intended to ensure New Zealand’s FIF rules do not act as a deterrent to migrants choosing to settle in New Zealand. Solutions suggested in the paper include allowing some migrants to pay tax on dividends and realised (as opposed to unrealised) gains in certain circumstances. The recent consultation paper is available here.
While we agree that reforms to the FIF regime are required, we consider that there are also broader issues with the FIF settings which need to be addressed. It remains to be seen what solution will be landed upon – watch this space.
Increased compliance activity
Inland Revenue published a media release relating to its increased compliance work between July - September 2024. In summary, Inland Revenue has:
- Opened almost 2,000 audit cases in the first quarter (55% more than the same quarter last year)
- Collected more than $1 billion of overdue debt
- Amended tax returns to the amount of almost $400 million
The release also notes that Inland Revenue is leveraging a range of data to help with its compliance activity. You can find the media release on Inland Revenue’s website here.
Decrease in use-of-money interest rates
From 16 January 2025, Inland Revenue’s use-of-money interest (UOMI) rate for underpayments decreased from 10.91% to 10.88%, and the UOMI rate for overpayments decreased from 4.67% to 4.3%. See the Taxation (Use of Money Interest Rates) Amendment Regulations 2024 along with the Inland Revenue release here.
Other updates
Other Inland Revenue updates include:
- Inland Revenue has published a new Public Remedials Log. The Remedials Log aims to inform the public about remedial legislative issues that Inland Revenue has considered and tracks the progress of each item through the legislative amendment process. You can view the Remedials Log on Inland Revenue’s Tax Policy website here.
- Inland Revenue has published a reminder on its website that 2024 is the final income year the relevant Canterbury earthquake relief measures apply. Some taxpayers may have to account for any relevant deferred amounts they did not include in past years in their 2024 income tax return. See Inland Revenue’s website here.
- Information on income tax deductions for new investors in standout yearlings acquired with the intention to breed in the future for profit is available on Inland Revenue’s website here.
Government and political updates
Consultation on strengthening New Zealand’s Capital Markets
The Ministry of Business, Innovation & Employment (MBIE) is consulting on two proposals to strengthen New Zealand’s Capital Markets as part of the first phase of the Government’s reform package. The two proposals currently being consulted on are:
- Adjustments to the climate-related disclosures regime following the first year of reporting, to ensure settings are appropriate for the New Zealand context
- Making it easier for KiwiSaver providers to invest funds in unlisted/private assets
The Government is also progressing other changes to improve the attractiveness of the New Zealand Stock Exchange. For further information, see the Beehive release here and MBIE release here.
Reforms to the science and innovation sector
The Prime Minister’s State of the Nation Speech focused on economic growth, with reforms announced to the science and innovation sector and to overseas investment, including:
- Disestablishing Callaghan Innovation with some of its functions transferred to other parts of the science, innovation and technology system
- Establishing a new agency, Invest New Zealand, to focus on attracting foreign direct investment and increasing research and development investment in New Zealand by multinational companies
- Transforming the current seven Crown Research Institutes into three Public Research Organisations (PROs), and establishing an additional advanced technology PRO
- Establishing a Science, Innovation and Technology Advisory Council
See the Beehive releases here, here and here, and the MBIE release here.
Economic update
On 17 December 2024, Treasury published the Half Year Economic and Fiscal Update 2024 (HYEFU) and Budget Policy Statement 2025.
HYEFU showed the economy is forecast to grow 0.5% this financial year and 3.3% in the following year. However, it also shows a further deterioration in the Crown’s financial position relative to Budget 2024. Tax revenue is forecast to be $13 billion lower over the forecast period, delaying the Government’s intended return to surplus by a year.
Based on the results of HYEFU, the Budget Policy Statement sets four priorities for Budget 2025, including lifting economic growth through measures addressing New Zealand’s long-term productivity challenges and keeping tight control of government spending. For more information, see the Treasury website here and here, and related Beehive release here.
Following the release of HYEFU, Treasury has published the Interim Financial Statements of the Government for the five months ended 30 November 2024. Key figures include:
- Tax revenue of $49.3 billion, which was in line with the HYEFU forecast
- Operating balance before gains and losses deficit of $4.7 billion, which was close to the HYEFU forecast
Refer to the Treasury media release here and related Beehive release here for more information.
Other updates
Other updates include:
- A Ministerial portfolio reshuffle has taken place with a number of changes made – including Finance Minister Nicola Willis taking on an additional role as Minister for Economic Growth, and Revenue Minister Simon Watts additionally taking on the Energy and Local Government portfolios. For full details of the changes, see the Beehive release here.
- The Government’s second Emissions Reduction Plan includes areas such as the Emissions Trading Scheme and sustainable finance. It also identifies eight key policies that will have the greatest potential emissions savings over the next five years, including introducing agricultural emissions pricing by 2030. Further information is available in the Beehive release here.
- Visitor visa requirements are being relaxed to allow tourists to work remotely while visiting New Zealand – see the Beehive release here and EY Tax Alert here.
International updates
Australia
Further to the previous EY Tax News Update, EY Global Tax News Alerts are available in relation to Australia’s:
- Public country-by-country reporting regime – see here and here
- Implementation of Pillar Two of the OECD/G20 two-pillar solution into domestic law – see here
United States
EY Global Tax News Alerts are available in relation to the following developments:
- US issues Executive Order on BEPS 2.0 – see here
- United States President signs 'America First Trade Policy' Presidential Memo – see here
United Nations
- The United Nations (UN) General Assembly has adopted the Terms of Reference for the development of a UN Framework Convention on International Tax Cooperation (Framework Convention). An intergovernmental negotiating committee will be established to draft the Framework Convention and two early protocols over the next three years, with the committee expected to complete its work in 2027. Refer to the EY Global Tax News Alert here for more information.
EY Global Webcasts
EY insights
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
- Top 10 geopolitical developments for 2025
- How will climate transition planning empower you to shape the future?
- EU Deforestation Regulation now postponed by 12 months
- Italy approves significant changes to the Digital Services Tax
- OECD releases new documents on GloBE rules and on qualified jurisdiction status
- OECD releases new documents on GloBE Information Return
- Pillar One Update from Co-chairs of Inclusive Framework on BEPS
- The Latest on BEPS and Beyond | December 2024
- The Latest on BEPS and Beyond | January 2025
Contact us
Dean Madsen | New Zealand Tax Leader
Ernst & Young
New Zealand
Dean.Madsen@nz.ey.com
Paul Dunne | New Zealand Tax Policy Leader
Ernst & Young
New Zealand
Paul.Dunne@nz.ey.com
Aaron Quintal | Partner, Private Client Services
Ernst & Young
New Zealand
Aaron.Quintal@nz.ey.com
Sarah-Jane Leslie | Senior Manager, Tax Policy
Ernst & Young
New Zealand
Sarah-Jane.Leslie@nz.ey.com
Sladjana Lines | Senior Manager, Tax Policy
Ernst & Young
New Zealand
Sladjana.Lines@nz.ey.com