On 26 August 2025, the Minister of Revenue introduced the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill to Parliament. The Bill sets annual income tax rates and makes a series of important policy updates designed to simplify compliance, modernise tax administration and provide targeted relief in key areas.
At The Accounting Hub, we believe this Bill represents a thoughtful, forward-looking approach to taxation. Many of the changes align with New Zealand’s need to attract global talent and investment, support ambitious small businesses and embrace the realities of today’s flexible working environment.
Encouraging global investment: simplified rules for Foreign Investment Funds (FIFs)
What’s changing
Currently, New Zealand residents who invest offshore must apply complex foreign investment fund (FIF) rules, choosing from several calculation methods. The Bill proposes a streamlined calculation method to provide a clearer, more consistent approach but more importantly to only tax the FIF where the holder has actually realised a gain in cash (dividends or capital gains), but it will be limited to new migrants and returning New Zealanders.
Why it matters
This change sits alongside new visa and residence settings aimed at attracting foreign investors. We see this as an excellent move: successful international investors bring both capital and expertise and by simplifying the tax treatment of offshore investments, New Zealand becomes a more appealing destination for them.
Supporting ambitious small businesses: employee share scheme deferral
What’s changing
Employees of unlisted companies often face immediate tax bills when they receive shares under an employee share scheme (ESS), even if they have no way of converting those shares to cash. The Bill introduces a deferral regime, postponing the tax liability until a liquidity event such as a sale of the shares, a stock exchange listing, or another event that gives the employee cash.
Why it matters
This is a welcome development for ambitious small businesses (lots of our clients fit this description!). Employee share schemes can be a powerful way to attract and retain talent, particularly when cashflow is tight. Aligning employees’ rewards with long-term company success is a proven driver of growth.
By deferring the tax bill until value is realised, the new rules make ESS far more practical and less risky for both employers and employees. Complexities still exist in the proposed rules, in particular around the payment of dividends, but it will be interesting to see how this shapes up.
Recognising modern work practices: remote work for non-residents
What’s changing
Previously, non-residents who worked remotely while visiting New Zealand risked unintentionally creating tax obligations for themselves or even their overseas employers. The new Bill clarifies that short-term non-resident visitors can undertake remote work here without triggering unintended tax consequences.
Why it matters
This is a smart update that reflects the way people actually work today. Digital nomads, entrepreneurs and professionals who spend a few weeks or months in New Zealand will be able to do so without fear of falling foul of the tax system.
For New Zealand, this means more spending in the local economy, more international connections and a stronger reputation as a welcoming, flexible destination. For visitors, it removes uncertainty and makes New Zealand an even more attractive place to spend time.
Broader simplification and remedial measures
Beyond these headline changes, the Bill is also about tidying up the tax system. It contains numerous measures to:
- Simplify GST rules for joint ventures, reducing compliance costs,
- Exempt income from the sale of excess residential electricity, encouraging household-level renewable energy, and
- Expand Inland Revenue’s information-sharing powers with other agencies and Police, particularly for crime prevention.
- Bring open-loop gift cards back under the FBT regime, reversing recent IRD guidance. See our blog on tax treatment of gift cards.
The commentary also highlights the Government’s focus on incremental improvements – removing outdated rules, clarifying grey areas and modernising systems so that compliance is easier for both taxpayers and Inland Revenue.
Our view
At The Accounting Hub, we welcome this Bill as a sign that New Zealand’s tax system is evolving in a positive direction.
- For investors, the FIF changes reduce complexity and make New Zealand more attractive to global capital.
- For small businesses, employee share schemes will become a realistic way to incentivise teams without unfair tax consequences.
- For international professionals, the remote work rule reflects modern life and helps position New Zealand as a flexible, forward-thinking country.
- For everyone, the compliance simplification measures mean fewer roadblocks and less red tape.
We’ll continue to monitor the Bill as it progresses through Parliament and will provide updates on how the changes apply in practice. If you’d like to understand how these reforms might affect your investments, your business, or your time in New Zealand, our team is here to help.