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EY Tax News Update: Edition 3, 2025
Welcome to the latest edition of EY’s tax news. This edition covers key tax developments for March 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:
- Application of the income tax rules when a close company provides short-stay accommodation
- 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
- Stay on top of new finalised guidance:
- Interpretation Statements: employee share scheme matters; GST treatment of fees paid in relation to managed funds
- Operational Statements: cash collateral is “money lent”; valuation of livestock
- Determination: GST on supplies through electronic marketplaces – hostel and motel opt-out agreement criteria
- Technical Decision Summaries: deductions and shortfall penalties; GST matters; receipt of funding and whether income
- Other items: Product Ruling; Determinations
- Significant overhaul of fringe benefit tax regime proposed
- Other updates – including regarding incorporated societies registration
Government and other updates
- New legislation enacts several changes
- Foreign investment fund regime reforms announced
- Economic update
- Other updates
International updates
- Australia: 2025-26 Federal Budget
EY Global Webcasts
- EY Global Trade webcast
EY Insights
- Tax Guides – various tax matters covering over 150 jurisdictions
- How increased global competition is reshaping tax priorities
- How to future-proof the global trade function
- Three steps to future-proofed customer tax withholding and reporting
- European Commission releases Omnibus Package I proposal to simplify EU Carbon Border Adjustment Mechanism regulation
- The Latest on BEPS and Beyond | March 2025
Inland Revenue updates
Current draft consultation items
|
Consultation item type |
Description |
Public consultation closes |
|---|---|---|
|
Draft Question We’ve Been Asked PUB00400: Income tax – How do the income tax rules apply when a close company provides short-stay accommodation? |
Explains how the income tax rules apply when a close company provides short-stay accommodation. Includes information on when and how the mixed-use asset rules and standard tax rules apply, and when shareholders or employees will receive income from their use of the property. |
2 May 2025 |
|
Draft Question We’ve Been Asked PUB00485: GST - Deposits a seller retains from cancelled land sale agreements |
Explains the GST consequences when a land sale agreement is cancelled and the seller retains the deposit. The item updates previous guidance from 2005. While the answer remains that GST does not apply to the deposit, the reasoning has been expanded and updated. |
17 April 2025 |
|
Relates to proposed changes to six existing Questions We’ve Been Asked, with the changes relating to the bright-line test for selling residential land. The updates are mainly intended to reflect changes in the law and align the items with the current 2-year bright-line test.
A reading guide with information on the main changes is available here. |
11 April 2025 |
New finalised guidance
Inland Revenue guidance items finalised since our last update include:
|
Finalised guidance name |
Description |
|---|---|
|
Interpretation Statement IS 25/04: What an employee share scheme is, the taxing date and apportionment |
Considers several matters in relation to employee share schemes, including:
|
|
Interpretation Statement IS 25/05: GST treatment of fees paid in relation to managed funds |
Contains the Commissioner’s view on the GST treatment of fees received by a manager of a managed fund and fees received by third-party suppliers (including investment managers) for supplies made to the manager of a managed fund. A related Operational Position (OP 25/01) notes that the Commissioner expects taxpayers to have adopted the position outlined in the interpretation statement by 1 April 2026. This timeframe is intended to provide taxpayers with time to adopt necessary changes to comply with the interpretation statement, such as changes to computer systems and/or contractual arrangements. |
|
These Interpretation Statements replace previous items published last year (IS 24/05 and IS 24/06) and have been updated to reflect a recent legislative change relating to the way in which the ACC earners’ levy interacts with cash-settled employee share scheme benefits. A related fact sheet on IS 25/06 (see here) has also been updated. |
|
|
Operational Statement OS 25/01: Cash collateral is “money lent” |
Outlines a change of view by the Commissioner on whether cash collateral provided as part of security lending and derivative transactions is “money lent”. Also discusses the resident and non-resident withholding tax obligations for interest payable on the cash collateral in light of the change in the Commissioner’s view. |
|
Operational Statement OS 25/02: Valuation of livestock |
Describes options available for taxpayers in the business of farming to value livestock on hand at balance date. Also contains commentary on relevant recent legislative changes. |
|
Determination DET 25/01: GST on supplies through electronic marketplaces – hostel and motel opt-out agreement criteria |
Relates to the GST electronic marketplace rules and sets criteria for when a person who supplies accommodation through an electronic marketplace (an underlying supplier) can enter into an opt-out agreement with the operator of an electronic marketplace. |
|
Technical Decision Summary TDS 25/04: Deductions and shortfall penalties |
Summarises a decision of the Tax Counsel Office in relation to the question of when the taxpayer commenced business, and whether the taxpayer was entitled to income tax deductions for expenditure on educational courses, motor vehicle costs and home office costs. Also considered whether the taxpayer was entitled to certain GST input tax credits. |
|
Technical Decision Summary TDS 25/05: GST - input tax, taxable activity, taxable supplies, registration |
Summarises a decision of the Tax Counsel Office in relation to whether the taxpayer was entitled to claim GST input tax deductions relating to legal fees incurred while not making any taxable supplies. Issues included whether the taxpayer was carrying on a taxable activity, whether the legal service to which the input tax related was used for making taxable supplies, and whether the taxpayer’s GST registration should be cancelled. |
|
Technical Decision Summary TDS 25/06: Receipt of funding |
Summarises a decision of the Tax Counsel Office in relation to a private ruling involving a trust. The trust received funding from the Crown under a funding agreement and passed it onto its wholly owned subsidiary, which used the funds to acquire specified assets and as working capital. The main issue was whether the funding was income to the trust. |
|
Technical Decision Summary TDS 25/07: GST - Zero-rating, input tax deductions, shortfall penalties |
Summarises a decision of the Tax Counsel Office which found that the taxpayer was not carrying on a taxable activity and therefore was not entitled to charge GST at 0% on supplies of goods or services, nor was the taxpayer entitled to claim input tax deductions. The issue of shortfall penalties was also considered. |
|
Other items |
Other items include:
|
Significant overhaul of fringe benefit tax regime proposed
Inland Revenue released an officials’ issues paper titled Fringe benefit tax – options for change (the Paper) for public consultation, along with a related Questions and Answers sheet – both available here. This consultation has been well signaled, following a review undertaken by Inland Revenue in 2022 which noted that “…it is not clear that FBT is a tax that functions well”, and with policy work on the FBT regime included in the Government’s Tax and Social Policy Work Programme.
The Paper proposes significant changes to how FBT applies to motor vehicles provided by an employer. The key change is a move away from the current focus on the type of vehicle and counting days a vehicle is unavailable for private use, towards a “close enough is good enough” approach for calculating the taxable value of a motor vehicle. The new approach would approximate private use according to three different categories, based on how the vehicle is able to be used.
Other proposals in the Paper include changes to the taxation of unclassified benefits intended to reduce compliance costs, integrating the taxation of entertainment expenditure into the FBT regime, increased information requirements in FBT returns and a new FBT-related disclosure requirement in the income tax return for taxpayers who have claimed tax deductions in respect of motor vehicles.
The proposals are largely aimed at reducing compliance costs, streamlining processes and improving integrity. Should the changes proceed, the broad reaching nature of the proposals means that many, if not all, employers will be impacted in some way. While it is positive to see consultation on the FBT regime with a view to decreasing compliance costs for taxpayers, there is still a lot of detail to be worked through. Submissions are due by 5 May 2025. If you would like further information on the proposals in the Paper or assistance with making a submission, please get in touch with your usual EY tax advisor.
Other updates
Other Inland Revenue updates include:
- Inland Revenue published information on its website noting that incorporated societies registered before 5 October 2023 must reregister by 5 April 2026 to keep incorporated society status. Societies that do not reregister but continue operating will need to apply for a new IRD number, ask Inland Revenue to transfer any GST or employer registrations, and reapply for any income tax exemption or deduction as a not-for-profit organisation. See Inland Revenue’s website here for details.
Government and other updates
New legislation enacts several changes
The Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Act 2025 (the Act) received Royal assent on 29 March 2025.
The Act contains several key tax reforms, including changes to:
- Adopt standardised emergency response provisions which can be switched on by Order in Council from 1 April 2025: these provisions are aimed at allowing Inland Revenue to provide timely relief for taxpayers in emergency times by removing the need to pass primary legislation under urgency. Given the increasing incidence of emergency events, this change should ease pressure on Parliamentary schedules while providing greater certainty for taxpayers in times of crisis.
- Allow retrospective Approved Issuer Levy (AIL) registration: from 1 April 2025, it will be possible to seek retrospective registration of securities for the 2% AIL in certain circumstances. It is positive to see that the criteria for seeking retrospective registration have eased compared to what was originally proposed when the Act was first introduced as draft legislation last year. This amendment will be welcome news for impacted taxpayers.
- Further limit the Portfolio Investment Entity (PIE) eligibility criteria from 1 April 2025: this amendment makes it clear that deposit takers cannot be a PIE. In addition, interest income received from associated persons will generally be excluded from being eligible PIE income, making it harder for entities receiving substantial associated party interest income to maintain PIE status.
- Amend the trust disclosure requirements to ease compliance for domestic trusts: including no longer requiring trustees to disclose nil value distributions and settlements, and the introduction of a bright-line of $100,000 per beneficiary or settlor for the disclosure of non-cash distributions or settlements. While these changes are positive, we are hopeful that further simplifications to the trust disclosure rules may be made in the future.
- Adopt the crypto-asset reporting framework (CARF): CARF is an OECD-led initiative aimed at increasing transparency around crypto-asset ownership. The changes include new information collection and reporting obligations for crypto-asset service providers from 1 April 2026.
- Increase thresholds relating to exempt employee share schemes: this change increases the maximum value of shares that can be offered ($7,500, up from $5,000) and the maximum benefit that can be provided ($3,000, up from $2,000).
- Make numerous other amendments across a range of areas: including several GST remedial amendments, extension of the due date for taxpayers claiming the R&D tax incentive under the General Approval method, amendments to certain rules for limited partnerships and changes relating to the transfer of overseas pension and superannuation funds to New Zealand.
The Act is available on the New Zealand legislation website here. If you would like further information on any of the reforms and how they might impact you, please reach out to your usual EY tax advisor.
Foreign investment fund regime reforms announced
Following previous Inland Revenue consultation on potential reforms to the foreign investment fund (FIF) regime, the Government has announced that legislation will be progressed later this year to allow for a new ‘revenue account method’ to be used to tax certain FIF income for some new migrants and returning New Zealanders.
Under the proposed revenue account method, income each year would broadly be dividends received plus 70% of realised capital gains. Eligible taxpayers would be able to choose to apply this new method rather than one of the existing available methods for calculating FIF income, such as the fair dividend rate method which essentially deems a 5% return year on year.
It is proposed that the revenue account method would apply from 1 April 2025 onward and would be available to people who became fully tax resident in New Zealand on or after 1 April 2024 (subject to them meeting other eligibility criteria). It is anticipated that the Government will also consider how the FIF rules impact New Zealand residents and whether broader changes to the rules are needed, but not until later in the year.
We will keep you updated as the draft legislation is introduced. In the meantime, further information is available in the Beehive release here and in an Inland Revenue fact sheet here.
Economic update
From the Treasury
Treasury has published the Interim Financial Statements of the Government for the seven months ended 31 January 2025. Key figures include:
- Tax revenue of $70.2 billion, which was $0.6 billion (0.9%) higher than forecast. The largest variance was in relation to GST, being $0.3 billion (1.9%) above forecast.
- Operating balance before gains and losses (excluding ACC) deficit of $3.7 billion, which was $1.4 billion less than the forecast deficit.
Refer to the Treasury media release here and related Beehive release here for more information.
From Stats NZ
Figures released by Stats NZ show that GDP increased 0.7% in the December 2024 quarter, following falls in the June and September quarters. In addition, the 0.4% rise in GDP per capita is the first rise in two years. See the Stats NZ release here and related Beehive release here.
Other updates
Other updates include:
- The International Monetary Fund (IMF) has recommended that New Zealand’s fiscal strategy should include broader tax policy reforms and initiatives to address long-term spending pressures. Options noted by the IMF include a capital gains tax, land value tax, adjustments to the corporate income tax regime, and changes to KiwiSaver aimed at achieving higher private retirement savings. The IMF notes that in the long term, New Zealand’s aging population will result in significant fiscal pressure, and it is essential to start early dialogue on comprehensive reform options. Refer to the IMF website here for more information.
- The Government has announced changes to fees and levies for goods crossing New Zealand’s border, with some Customs fees increasing from 1 July this year, and structural changes to the fee regime taking place in April 2026. Further details are available in the Beehive release here.
- Next steps for the establishment of Invest New Zealand (Invest NZ) have been announced by the Government. Among other things, Invest NZ’s core responsibilities will include attracting foreign direct investment and encouraging multinational corporations to establish operations and conduct research and development in New Zealand. Refer to the Beehive release here for further information.
International updates
Australia
The 2025-26 Federal Budget was delivered on 25 March 2025.
Key measures for Multinational Enterprises include the commitment of AU$999m in funding over four years to extend and expand the Australian Taxation Office's tax compliance activities, and a deferral of the strengthening of the foreign-resident capital gains tax regime.
Refer to the EY Global Tax News Alert here for a summary of the key announced tax measures that affect business tax planning, compliance processes and business incentives. Coverage of the broader economic and policy issues is available on the EY Australia website here.
EY Global Webcasts
EY Global Trade webcast – will be available on demand here
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
- How increased global competition is reshaping tax priorities
- How to future-proof the global trade function
- Three steps to future-proofed customer tax withholding and reporting
- European Commission releases Omnibus Package I proposal to simplify EU Carbon Border Adjustment Mechanism regulation
- The Latest on BEPS and Beyond | March 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
Sladja Lines | Senior Manager, Tax Policy
Ernst & Young, New Zealand
Sladjana.Lines@nz.ey.com