EY Tax Monthly News Update – Edition 2, 2025

EY Tax News Update: Edition 2, 2025

Welcome to the latest edition of EY’s tax news. This edition covers key tax developments for February 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:
  • GST consequences when a land sale agreement is cancelled and the seller retains the deposit
  • The bright-line test for selling residential land – changes to several existing items
  • Meaning of “taxable activity” for GST purposes
  • Whether a deduction can be claimed for expenditure incurred on repairing a recently acquired capital asset
  • Employee share scheme timing issues for start-up companies
• Stay on top of new finalised guidance:
  • Technical Decision Summaries: Financing arrangement to fund the refurbishment of a capital asset; GST – Output tax deductions, shortfall penalties
  • Other items: Determinations
• Changes on the horizon for charities and not-for-profit sector 
• Donations tax credit regime has room for improvement
• Other updates – including focus on payday filing

Government and political updates

• Tax Bill with raft of changes progressing through Parliament
• Budget 2025 – one to watch
• Economic update
• Other updates

International updates

• United States – EY Global Tax News Alerts available on several developments

EY Global Webcasts

• The outlook for global tax policy and controversy in 2025
• How trade operations and supply chain strategy can adapt to President Trump’s policy

EY Insights    

• Tax Guides – various tax matters covering over 150 jurisdictions
• How will your decisions today shape the future for generations to come?
• Digital services tax jurisdiction activity summary (1 February 2025)
• UN intergovernmental negotiating committee on Tax Framework Convention on Tax Cooperation holds organisational session
• European Commission announces initiatives to improve competitiveness and adopts 2025 Work Programme
• The Latest on BEPS and Beyond | February 2025 

Current draft consultation items

New finalised guidance

Inland Revenue guidance items finalised since our last update include:

Changes on the horizon for charities and not-for-profit sector – don’t miss your chance to have your say 

Inland Revenue has released an Officials’ Issues Paper outlining issues and policy options for the taxation of charities and the not-for-profit sector.

The review was well signalled as part of the Government’s Tax and Social Policy Work Programme, announced in November last year. Finance Minister Nicola Willis has previously indicated in the media that changes could be announced as part of this year’s Budget, set to be released on Thursday 22 May. 

The proposals outlined in the paper may have wider application than the name may suggest. The paper is split into three key areas which consider reforms to:

• Restrict the income tax exemption available to charities that run businesses, where that business is unrelated to the charitable activity and particularly where the business has accumulated funds
• Review the lack of specific rules for “donor-controlled charities” (sometimes referred to as private foundations), to address integrity concerns arising from the degree of control that owners have over the charity’s funds and activities
• Address integrity and simplification issues, including potential removal of the fringe benefit tax exemption applicable to charities and limiting the scope of several specific income tax exemptions for some bodies, potential reforms relating to mutuality and the taxation of certain member transactions, and possible simplifications for donors and volunteers

Public submissions on the paper can be made until 31 March, following which the Government will consider feedback and decide whether any changes should be made to the current rules.

It is likely any changes will be included in the Budget. This leaves very little time for consultation on the detail of changes. It is important Officials have adequate time to ensure proposals are workable for charities of different sizes and do not add to compliance costs. We are hopeful there will be additional consultation opportunities or a post-announcement review of final decisions to ensure the reforms are well targeted and workable.

If you would like more information on the proposals in the paper or assistance with making a submission, please get in touch with your usual EY tax advisor.

Donations tax credit regime has room for improvement

Findings from Inland Revenue’s regulatory stewardship review of the donations tax credit (DTC) regime have been published. The review was conducted in 2023-2024 with the aim of assessing whether the regime is operating as intended, achieving its objectives and whether it remains fit for purpose.

Overall, the review finds that while the DTC regime performs adequately, there are opportunities for reform. Broadly, the review suggests four key areas for potential improvement:

• Restructuring the credit – delinking from income tax to allow real-time payments
• Streamlining administration – this could include integrating with donee organisations and intermediaries, moving away from receipts to a payments-based system, or undertaking some minor administrative adjustments
• Addressing cultural considerations – such as improving education materials and reconsidering the treatment of overseas giving to Pacific Island countries
• Improving compliance measures – for example by increasing targeted enforcement, and advertising Inland Revenue’s approach to non-compliance

Inland Revenue’s response to the report findings notes that Inland Revenue is committed to implementing several recommendations immediately or in the medium-term, including considering integrating with donee organisations to streamline the DTC claiming process.

However, many of the more significant recommendations (delinking the credit from income tax, implementing real-time payments and moving to a payments-based system) will not be prioritised at this time and will only be considered if the Government desires large-scale reform of the DTC regime.  

You can view the report and Inland Revenue’s response on Inland Revenue’s website here.

Other updates

Other Inland Revenue updates include:

• Inland Revenue is continuing to increase its focus on payday filing and will be contacting employers in cases where they think the employment information needed for a month may not have been filed. Further details are available on Inland Revenue’s website here.
• Inland Revenue has published a reminder on its website that the Small Business Cashflow (Loan) Scheme has nearly reached its 5-year anniversary, meaning it will soon expire for those with a 5-year loan. Any unpaid loan balance (plus interest) at the end of the loan’s term will automatically default. Inland Revenue will treat this as overdue debt and may also charge default interest. See Inland Revenue’s website here for more information.
•  A ‘class of case’ determination for the Income Equalisation Scheme has been made by Inland Revenue for farmers and growers affected by drought conditions in the Taranaki region – see Inland Revenue’s website here. 

Tax Bill with raft of changes progressing through Parliament

The Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Matters) Bill was reported back to Parliament by the Finance and Expenditure Select Committee (FEC) on 27 February 2025 and passed its second reading in Parliament on 4 March 2025.

The Bill was first introduced in August 2024 and proposes a wide array of changes, including new standardised tax relief measures that can be switched on in times of emergency. Other proposed changes include adoption of the OECD’s crypto-asset reporting framework and rules affecting the transfer of overseas pension and superannuation funds to New Zealand. For a reminder of the key changes proposed in the Bill, refer to our previous EY Global Tax News Alert here.

Key recommendations made by the FEC on report back of the Bill include:

• Changes to the proposed standardised emergency event tax relief measures to clarify when an emergency event occurs
• Changes to the qualifying recognised overseas pension scheme amendments
• Expanding the scope of the proposed amendments which allow for retrospective registration of securities for the 2% approved issuer levy withholding rate

The Bill as reported back, FEC’s report and Inland Revenue Policy’s Departmental Report on submissions received on the Bill are available on Inland Revenue’s website here. It is expected that the Bill will continue to progress through Parliament for enactment by the end of March 2025.

Budget 2025 – one to watch

New Zealand’s 2025 Budget will be delivered on Thursday 22 May, with a focus on growing the economy. Finance Minister Nicola Willis stated in the Beehive release here that the Budget will “…contain bold steps to support economic growth, including measures to address New Zealand’s long-standing productivity challenges. These measures will go beyond the traditional Budget focus on spending and savings initiatives.”

While the extent of any tax changes in the Budget will not become clear until Government announcements are made and the Budget is delivered, it is possible that Budget 2025 could be one to watch from a tax perspective – we will keep you updated following Budget Day.

Economic update

Treasury has published the Interim Financial Statements of the Government for the six months ended 31 December 2024. Key figures include:

• Tax revenue of $59.9 billion, which was $0.2 billion higher than forecast. The largest variance was in GST being $0.3 billion (1.5%) above forecast.
• Operating balance before gains and losses (excluding ACC) deficit of $3.5 billion, which was $0.4 billion less than the forecast deficit.

Refer to the Treasury media release here and related Beehive release here for more information.

Other updates

Other updates include:

• The Government is preparing public consultation on GST policy proposals relating to joint ventures in the bloodstock industry. The consultation document is expected to be published on Inland Revenue’s Tax Policy website over the coming months. Refer to the Beehive release here for further information.
• New Zealand’s list of reportable jurisdictions for application of the Common Reporting Standard has been updated from 31 March 2025, with Armenia, Jordan, Rwanda, Senegal, and Tunisia added as reportable jurisdictions for reporting periods beginning on or after 1 April 2024. See the relevant amendment regulations here. 

United States

EY Global Tax News Alerts are available in relation to the following developments:

• United States initiates review to determine reciprocal tariffs on all trading partners – see here
• US modifies and expands tariffs on steel and aluminium imports, citing national security – see here
• US initiates review of other countries' imposition of Digital Services Taxes on US companies and opens comment period on nonreciprocal trade arrangements – see here
• US initiates investigation into imports of copper, scrap copper and copper derivatives – see here

The outlook for global tax policy and controversy in 2025 – register here

How trade operations and supply chain strategy can adapt to President Trump’s policy – register 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
• How will your decisions today shape the future for generations to come?
• Digital services tax jurisdiction activity summary (1 February 2025)
• UN intergovernmental negotiating committee on Tax Framework Convention on Tax Cooperation holds organisational session
• European Commission announces initiatives to improve competitiveness and adopts 2025 Work Programme
• The Latest on BEPS and Beyond | February 2025

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