Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Measures) Bill - Amendment paper No 559
Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Measures) Bill - Amendment paper No 559
Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Measures) Bill - Amendment paper No 559
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No 559
House of Representatives
Amendment Paper
Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Measures) Bill
Proposed amendments
Hon Simon Watts, in Committee, to move the following amendments:
Clause 2
After clause 2(1) (page 11, after line 7), insert:
(1B)
Section 128BA comes into force on 10 October 2000.
In clause 2(2), replace “149(1), and 191B(2)”
(page 11, line 9) with “and 149(1)”
.
After clause 2(8) (page 12, after line 4), insert:
(8B)
Section 169(1BB)(d) and (e) comes into force on 18 March 2019.
(8C)
Section 191B(2) comes into force on 1 April 2019.
In clause 2(17), replace “and 131”
(page 12, line 21) with “131, and 184”
.
In clause 2(20B), replace “75C”
(page 12, line 32) with “75J”
.
After clause 2(21) (page 12, after line 37), insert:
(21BA)
Section 169(1BB)(c) comes into force on 1 October 2025.
(21BAB)
Sections 75BB, 75K, and 95(1B) and (24BB) come into force on 26 December 2025.
After clause 2(21B) (page 13, after line 1), insert:
(21C)
Sections 83B, 83C, 112(2B), and 173(2) come into force on 21 February 2026.
In clause 2(23),—
(a)
after “11,”
(page 13, line 3), insert “11B,”
; and
(b)
after “64(1) and (3),”
(page 13, line 5), insert “69B, 69C,”
; and
(c)
after “75C,”
(page 13, line 5), insert “81B, 82B,”
; and
(d)
after “91,”
(page 13, line 5), insert “93B,”
; and
(e)
replace “95(2), (5), (6), (7), (8), (11), (14), (15), (17), (24)(b), (25B)”
(page 13, lines 5 and 6) with “95(2), (5), (6), (6B), (7), (8), (11), (13B), (14), (14BB), (15), (17), (18B), (18C), (18D), (24)(b), (25B), (25C)”
; and
(f)
replace “(5), and (6)”
(page 13, line 8) with “and (5)”
; and
(g)
replace “114”
(page 13, line 9) with “114(1) and (2)”
; and
(h)
after “169(1),”
(page 13, line 11), insert “(1BB)(a) and (b),”
.
New clause 11B
After clause 11 (page 18, after line 5), insert:
11B New section CH 10C inserted (Interest apportionment: Non-qualifying infrastructure debt)
(1)
After section CH 10B, insert:
CH 10C Interest apportionment: non-qualifying infrastructure debt
An amount derived by a person under section FE 7C(4) (Exemption for eligible infrastructure) is income of the person.
Defined in this Act: amount, income
(2)
Subsection (1) applies for the 2026–27 and later income years.
Clause 16
In clause 16(2), new section CW 38(5)(f), replace “New Zealand Institute of Advanced Technology”
(page 20, line 30) with “New Zealand Institute for Advanced Technology”
.
New clause 18B
After clause 18 (page 20, after line 34), insert:
18B Section CW 55BC amended (Water organisations)
In section CW 55BC(2), replace “In this section and section CW 39, water”
with “Water”
.
New clause 24B
After clause 24 (page 22, after line 21), insert:
24B New section CZ 42 inserted (Transitional tax relief: water organisations)
(1)
After section CZ 41, insert:
CZ 42 Transitional tax relief: water organisations
Who this section applies to
(1)
This section applies to a water organisation that derives—
(a)
assessable income before the 2025–26 income year; and
(b)
exempt income under section CW 55BC (Water organisations) in the 2025–26 or a later income year.
Effect of this section
(2)
No income tax liability arises under this Act for the water organisation solely because of the organisation’s income becoming exempt income under section CW 55BC.
Defined in this Act: assessable income, exempt income, income, income tax liability, income year, water organisation
(2)
Subsection (1) applies for the 2024–25 and 2025–26 income years.
Clause 39
Replace clause 39(3) (page 27, lines 19 to 25) with:
(3)
Subsections (1) and (2) apply to an employee share scheme to the extent the share scheme taxing date under section CE 7B(1) of the Income Tax Act 2007 arises on or after 1 April 2026. Subsections (1) and (2) do not apply to a person in respect of an employee share scheme that is part of a merger or acquisition transaction for which the person entered into a binding contract before the date on which the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Act 2025 receives the Royal assent.
New clauses 69B and 69C
After clause 69 (page 47, after line 6), insert:
69B Section FE 2 amended (When this subpart applies)
(1)
After section FE 2(1), insert:
Persons to whom this subpart does not apply
(1BA)
Despite subsection (1), this subpart does not apply, except to the extent provided in section FE 7B or FE 7C, to public project debt or an eligible infrastructure entity when a person chooses to apply section FE 7B or FE 7C.
(2)
In section FE 2, list of defined terms, insert “eligible infrastructure entity”
and “public project debt”
.
(3)
Subsections (1) and (2) apply for the 2026–27 and later income years.
69C New section FE 7C inserted (Exemption for eligible infrastructure)
(1)
After section FE 7B, insert:
FE 7C Exemption for eligible infrastructure
When this section applies
(1)
This section applies, for a person and an income year, when the person—
(a)
meets the requirements of section FE 2(1)(b), (c), or (cc); and
(b)
is an eligible infrastructure entity for the income year; and
(c)
has qualifying infrastructure debt for the income year; and
(d)
chooses, in a form and manner approved by the Commissioner, for this section to apply to them for the income year; and
(e)
has not chosen to apply section FE 7B.
Non-application of subpart
(2)
Subpart FE does not apply to an eligible infrastructure entity except to the extent necessary to give effect to this section.
Amounts relating to eligible infrastructure entity excluded
(3)
For the purposes of applying this subpart to any other person, the following are excluded:
(a)
the debt, interest, assets, and non-debt liabilities of the eligible infrastructure entity; and
(b)
any asset to the extent it represents a direct or indirect interest in the eligible infrastructure entity (including, for example, goodwill).
Income
(4)
If the eligible infrastructure entity incurs interest on debt that is not qualifying infrastructure debt or issues fixed-rate foreign equity or fixed-rate shares, the person is treated as deriving an amount of income under section CH 10C (Interest apportionment: non-qualifying infrastructure debt) calculated using the following formula:
non-QID interest + FRD.
Items in formula
(5)
In the formula in subsection (4),—
(a)
non-QID interest is the total amount of interest incurred by the eligible infrastructure entity for the income year on debt that is not qualifying infrastructure debt:
(b)
FRD is the total amount of dividends paid by the eligible infrastructure entity, for the income year, for fixed-rate foreign equity or fixed-rate shares issued by the eligible infrastructure entity and held by a person resident in New Zealand.
Qualifying infrastructure group
(6)
A qualifying infrastructure group is treated as a single person for the purposes of this section if, for the income year, the group, treated as if it were a single entity and disregarding intra-group balances, meets the definition of eligible infrastructure entity, except for paragraph (d).
Definition of eligible infrastructure entity
(7)
In this section and section FE 2, eligible infrastructure entity means a person—
(a)
that carries on a business or project consisting of—
(i)
creating, operating, maintaining, or upgrading qualifying infrastructure assets the persons owns; and
(ii)
any activity in New Zealand that is ancillary to or facilitates the activities described in subparagraph (i), if the person carries on any such activity; and
(b)
whose assets, to the extent they are used in, or for the purposes of, the business or project referred to in paragraph (a), comprise at least 95% of the total value of the person’s assets recognised in its balance sheet for the income year and include—
(i)
tangible assets:
(ii)
intangible assets:
(iii)
financial assets to which the person is a party:
(iv)
goodwill:
(v)
deferred tax assets; and
(c)
that does not have—
(i)
a permanent establishment outside New Zealand:
(ii)
an interest in a foreign investment fund, controlled foreign company, partnership, or a trust in a foreign jurisdiction:
(iii)
an asset situated outside New Zealand, other than an asset that is held in relation to the business or project described in paragraph (a) and is one or more of the following:
(A)
a hedging arrangement:
(B)
minor:
(C)
situated outside New Zealand for maintenance:
(D)
situated outside New Zealand other than for maintenance for a cumulative period of no more than 6 months; and
(d)
despite paragraphs (a) to (c), that has a right to impose levies under an Order in Council under the Infrastructure Funding and Financing Act 2020.
Definition of qualifying infrastructure asset
(8)
In this section, qualifying infrastructure asset—
(a)
means a tangible asset located in New Zealand that provides, or is integral to providing, essential services to the public or a class of users on a shared-use basis, that is similar in nature to the following types of assets, and includes the following types of assets:
(i)
transport infrastructure (for example, roads, rail, ports, airports, and ferries); and
(ii)
energy infrastructure (for example, electricity generation, transmission, and distribution assets); and
(iii)
water infrastructure (for example, water supply, wastewater, and stormwater systems); and
(iv)
telecommunication infrastructure (for example, fibre networks, data centres, and communication towers); and
(v)
waste infrastructure (for example, recycling facilities and landfills); and
(vi)
social infrastructure (for example, hospitals, schools, libraries, prisons, large-scale student accommodation or similar public facilities); and
(b)
despite paragraph (a), includes a tangible asset described in that paragraph that provides, or is integral to providing, an essential service that is not provided on a shared-use basis if—
(i)
the service is of a kind that is ordinarily provided on a shared-use basis to the public or a class of users; and
(ii)
the absence of shared use arises solely because the service is supplied to a single user or a small group of users under contractual arrangements; and
(c)
does not include—
(i)
commercial buildings (for example, offices, supermarkets, and shopping malls); and
(ii)
industrial buildings (for example, factories); and
(iii)
dwellings.
Definition of qualifying infrastructure debt
(9)
In this section, qualifying infrastructure debt means, for the eligible infrastructure entity, debt for which, for the income year, all the following are satisfied:
(a)
the debt is applied to the eligible infrastructure entity’s business or project; and
(b)
the debt is third-party debt; and
(c)
the debt is limited-recourse debt.
Definition of third-party debt
(10)
In this section, third-party debt—
(a)
means debt where the funds are provided by a person who is not—
(i)
a person with a direct or indirect ownership interest in the borrower:
(ii)
an associated person of a person described in subparagraph (i); and
(b)
despite paragraph (a) and subject to paragraph (c), includes debt when the funds are provided by a person who, if the eligible infrastructure entity is a listed company,—
(i)
is a shareholder of the listed company and holds, together with any associated persons, 5% or less of the shares in the listed company:
(ii)
is an associate of a shareholder described in subparagraph (i), if the shareholder holds, together with any associated persons, 5% or less of the shares in the listed company; and
(c)
excludes debt if a person described in paragraph (a)(i), or an associated person of that person, provides the funds or pays the money, directly or indirectly, to another person (the direct lender) who provides funds to the borrower, and the arrangement has the purpose or effect of enabling the funds to be provided to the borrower, or of reimbursing or compensating the direct lender for providing the funds; and
(d)
excludes debt that—
(i)
is convertible into shares, other equity interests, or partner’s interests of the borrower or an associated person:
(ii)
provides for any return calculated by reference to profits, cashflows, or distributions of the borrower or an associated person:
(iii)
entitles the lender to any amount from the borrower or an associated person beyond repayment of principal and accrued interest on the debt, other than fees, charges, or expenses payable to the lender in connection with the debt; and
(e)
excludes debt if the funds are provided, directly or indirectly, by a partner to a partnership to the extent the partnership is the borrower.
Definition of limited-recourse debt
(11)
In this section, limited-recourse debt means debt that, in the event of default, the lender’s recourse is limited to—
(a)
the assets and income of the eligible infrastructure entity, including—
(i)
shares in the eligible infrastructure entity, if the entity is a New Zealand company:
(ii)
in the case of an eligible infrastructure entity that is a partner in a partnership, the assets and income only of the partnership giving rise to the eligible infrastructure entity, and any interests in that partnership, but not the assets and income that do not form part of the partnership; and
(b)
recourse provided, or to be provided, under an equity commitment document or a letter of credit that—
(i)
relates to the construction or creation of a new qualifying infrastructure asset by an eligible infrastructure entity that was established primarily for the purpose of creating or constructing that asset; and
(ii)
is for a specified amount of equity that does not exceed the amount reasonably required to obtain the loan to construct or create the qualifying infrastructure asset; and
(iii)
applies for a period that does not extend beyond the construction period; and
(c)
if paragraph (d) of the definition of eligible infrastructure entity applies,—
(i)
the benefit of a guarantee or other assurance from the Crown in connection with the right to impose levies; and
(ii)
the benefit of a security or a guarantee from a third party over that third party’s assets, to the extent the security or guarantee applies only during the construction period and relates solely to the construction or creation of a qualifying infrastructure asset.
Definition of non-debt liabilities
(12)
In this section, non-debt liabilities means the portion of the total group non-debt liabilities calculated under section FE 16B(1) or (2), as applicable, to the extent to which they relate to the eligible infrastructure entity.
Definition of qualifying infrastructure group
(13)
In this section, qualifying infrastructure group means—
(a)
a wholly-owned group of companies:
(b)
a subset of a wholly-owned group of companies that chooses to be treated as a group for the purposes of this section if—
(i)
the subset includes every company in the wholly-owned group that is wholly owned by a member of the subset; and
(ii)
no member of the subset has an ownership interest in an entity that is not a member of the subset.
Defined in this Act: amount, associated person, commercial building, Commissioner, company, dividend, eligible infrastructure entity, fixed-rate foreign equity, fixed-rate share, foreign-sourced amount, income, income year, interest, limited-recourse debt, listed company, non-debt liabilities, ownership interest, partner’s interests, qualifying infrastructure asset, qualifying infrastructure debt, qualifying infrastructure group, third-party debt, wholly-owned group of companies
(2)
Subsection (1) applies for the 2026–27 and later income years.
New clause 75BB
After clause 75B (page 48, after line 23), insert:
75BB Section HP 4 amended (Meaning of terms defined in global anti-base erosion model rules)
In section HP 4, after “subpart”
, insert “and section HZ 13 (Transitional rule for application of global anti-base erosion model rules)”
.
Clause 75G
In clause 75G(7), new section HR 10B(5C), replace “includes the breach date”
(page 50, line 27) with “includes the breach date,”
.
New clause 75K
After clause 75J (page 52, after line 14), insert:
75K New section HZ 13 inserted (Transitional rule for application of global anti-base erosion model rules)
After section HZ 12, insert:
HZ 13 Transitional rule for application of global anti-base erosion model rules
When this section applies
(1)
This section applies for a person and the fiscal year that begins on or after—
(a)
1 January 2026 if the person has a fixed balance date; or
(b)
26 December 2025 if the person has a 52–53 week Fiscal Year.
Application of global anti-base erosion model rules
(2)
For the purposes of section HP 3(3)(b)(ii) (Application of global anti-base erosion model rules), the side-by-side package guidance published by the OECD in January 2026—
(a)
is treated as if it were published before the start of the fiscal year; and
(b)
any reference in the guidance to “Fiscal Years commencing on or after 1 January 2026” should be read as “Fiscal Years commencing on or after 1 January 2026, or on or after 26 December 2025 for an MNE Group with a 52–53 week Fiscal Year,”; and
(c)
any reference in the guidance to “Fiscal Years commencing before 1 January 2026” should be read as “Fiscal Years commencing before 1 January 2026, or before 26 December 2025 for an MNE Group with a 52–53 week Fiscal Year”.
Some definitions
(3)
In this section,—
52–53 week Fiscal Year means an accounting period of 52 or 53 weeks, determined by reference to a specific day in a 12-month period
side-by-side package guidance means the guidance set out in Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-base Erosion Model Rules (Pillar Two), Side-by-Side Package, Inclusive Framework on BEPS, as amended from time to time.
Defined in this Act: 52–53 week Fiscal Year, global anti-base erosion model rules, side-by-side package guidance
New clause 81B
After clause 81 (page 53, after line 32), insert:
81B Section RA 13 amended (Payment dates for terminal tax)
(1)
After section RA 13(2), insert:
(2B)
Despite subsection (2), if the person is a person to whom section RC 3(2)(e) or (f) applies, the person’s terminal tax for a tax year is due and payable on the date that would be the final instalment date of provisional tax for the tax year if the person were liable to pay provisional tax.
(2)
Subsection (1) applies for the 2026–27 and later income years.
New clause 82B
After clause 82 (page 53, after line 37), insert:
82B Section RC 3 amended (Who is required to pay provisional tax?)
(1)
After section RC 3(2)(d), insert:
(e)
the Crown as owner of the New Zealand Superannuation Fund and the VCF:
(f)
a company treated as being wholly owned by the Crown under section HR 4B(3) (Activities relating to New Zealand Superannuation Fund and Venture Capital Fund).
(2)
In section RC 3, list of defined terms, insert “VCF”
.
(3)
Subsections (1) and (2) apply for the 2026–27 and later income years.
New clauses 83B and 83C
After clause 83 (page 54, after line 3), insert:
83B Section RD 5 amended (Salary or wages)
After section RD 5(1), insert:
Exclusion for specified contractors and other non-employees
(1B)
Despite subsection (1), an amount is not salary or wages if it is a payment made to a person who is—
(a)
a specified contractor, as defined in section 6 of the Employment Relations Act 2000; or
(b)
not an employee under that section because their employment status is determined as other than an employee under another Act.
83C Section RD 7 amended (Extra pay)
After section RD 7(1), insert:
Exclusion for specified contractors and other non-employees
(1B)
Despite subsection (1), an amount is not an extra pay if it is a payment made to a person who is—
(a)
a specified contractor, as defined in section 6 of the Employment Relations Act 2000; or
(b)
not an employee under that section because their employment status is determined as other than an employee under another Act.
Clause 84B
In clause 84B(3), delete “accident compensation earnings-related payments and personal services rehabilitation”
(page 54, lines 19 to 20).
New clauses 93B and 93C
After clause 93 (page 57, after line 12), insert:
93B Section RP 17B amended (Tax pooling accounts and their use)
(1)
Replace section RP 17B(2)(b) with:
(b)
terminal tax, other than terminal tax for a person to whom section RC 3(2)(e) or (f) (Who is required to pay provisional tax?) applies:
(2)
Subsection (1) applies for the 2026–27 and later income years.
93C New section RP 17C inserted (Extension of time for tax pooling for 2022–23 and 2023–24 income years)
After section RP 17B, insert:
RP 17C Extension of time for tax pooling for 2022–23 and 2023–24 income years
Extension of time for tax pooling
(1)
This section extends the time within which a person must make a request under section RP 17B(4)(a) and (b).
Criteria for extension of time
(2)
A person may ask a tax pooling intermediary to arrange the transfer of an amount to their tax account with the Commissioner on or before 1 October 2027 if the criteria in subsections (3) to (7) are met.
Obligation for 2022–23 or 2023–24 income years
(3)
The transfer satisfies an obligation for either or both of the 2022–23 and 2023–24 income years for one or more of the following:
(a)
provisional tax (other than under the AIM method) for a tax year:
(b)
terminal tax for a tax year:
(c)
interest under Part 7 of the Tax Administration Act 1994 on the provisional tax or terminal tax.
Contract entered into on or before 1 October 2026
(4)
The person enters into a contract with the tax pooling intermediary on or before 1 October 2026 to satisfy an obligation described in subsection (3).
Person meets certain requirements
(5)
On the date the contract is entered into, the person—
(a)
is not bankrupt or liquidated:
(b)
was not presumed to have been unable to pay their debts under section 287 of the Companies Act 1993 at some time in the previous 12 months:
(c)
has not committed an act of bankruptcy under the Insolvency Act 2006 at some time in the previous 12 months:
(d)
is not the subject of legal recovery proceedings for unpaid tax.
No outstanding returns or information
(6)
On the date the contract is entered into, the person has provided all the following that the person is required to provide:
(a)
returns of income under section 33 of the Tax Administration Act 1994:
(b)
returns under the Goods and Services Tax Act 1985:
(c)
employment income information under sections 23E to 23H and 23J of the Tax Administration Act 1994.
No outstanding amounts
(7)
On the date the contract is entered into, the person does not have any of the following amounts payable for which the due date for payment has already passed:
(a)
goods and services tax payable under section 23 of the Goods and Services Tax Act 1985:
(b)
an amount set out in section RA 5 (Tax obligations for employment-related taxes).
Discretion to waive criteria
(8)
The Commissioner may waive some or all of the criteria set out in subsections (5), (6), and (7) if the Commissioner has accepted a request for financial relief under section 177 of the Tax Administration Act 1994.
Defined in this Act: amount, ask, Commissioner, pay, provisional tax, tax account with the Commissioner, terminal tax
Clause 95
After clause 95(1) (page 57, after line 28), insert:
(1B)
Insert, in appropriate alphabetical order:
52–53 week Fiscal Year is defined in section HZ 13 (Transitional rule for application of global anti-base erosion model rules) for the purposes of that section
After clause 95(6) (page 58, after line 32), insert:
(6B)
Insert, in appropriate alphabetical order:
eligible infrastructure entity is defined in section FE 7C(7) (Exemption for eligible infrastructure) for the purposes of that section
After clause 95(13) (page 59, after line 19), insert:
(13B)
Insert, in appropriate alphabetical order:
limited-recourse debt is defined in section FE 7C(11) (Exemption for eligible infrastructure) for the purposes of that section
After clause 95(14B) (page 59, after line 31), insert:
(14BB)
Insert, in appropriate alphabetical order:
non-debt liabilities is defined in section FE 7C(12) (Exemption for eligible infrastructure) for the purposes of that section
After clause 95(18) (page 60, after line 9), insert:
(18B)
Insert, in appropriate alphabetical order:
qualifying infrastructure asset is defined in section FE 7C(8) (Exemption for eligible infrastructure) for the purposes of that section
(18C)
Insert, in appropriate alphabetical order:
qualifying infrastructure debt is defined in section FE 7C(9) (Exemption for eligible infrastructure) for the purposes of that section
(18D)
Insert, in appropriate alphabetical order:
qualifying infrastructure group is defined in section FE 7C(13) (Exemption for eligible infrastructure) for the purposes of that section
After clause 95(24B) (page 61, after line 4), insert:
(24BB)
Insert, in appropriate alphabetical order:
side-by-side package guidance is defined in section HZ 13 (Transitional rule for application of global anti-base erosion model rules) for the purposes of that section
In clause 95(24C), replace “New Zealand Institute of Advanced Technology”
(page 61, line 6) with “New Zealand Institute for Advanced Technology”
.
After clause 95(25B) (page 61, after line 10), insert:
(25C)
Insert, in appropriate alphabetical order:
third-party debt is defined in section FE 7C (Exemption for eligible infrastructure) for the purposes of that section
After clause 95(27B) (page 61, after line 28), insert:
(27BB)
In the definition of water organisation, delete “for the purposes of that section and section CW 39 (Local authorities)”
.
In clause 95(28), replace “Subsection (27)”
(page 61, line 37) with “Subsections (6B), (13B), (14BB), (18B), (18C), (18D), (25C), and (27)”
.
Clause 111
Delete clause 111(6) (page 72, line 5).
Clause 112
After clause 112(2) (page 72, after line 11), insert:
(2B)
After section 6(5), insert:
(6)
For the purposes of subsection (3)(b), a person is not engaged, occupied, or employed under a contract of service if the person is—
(a)
a specified contractor, as defined in section 6 of the Employment Relations Act 2000; or
(b)
not an employee under that section because their employment status is determined as other than an employee under another Act.
New clause 128BA
After clause 128 (page 77, after line 11), insert:
128BA Section 58 amended (Personal representative, liquidator, receiver, etc)
In section 58(1C), replace “if the incapacitated person is entitled to, and has not previously deducted, the amount”
with “if, at the time the deduction is claimed, the incapacitated person would have been entitled to a deduction for the amount had they not been incapacitated, and the incapacitated person has not previously deducted the amount”
.
Clause 133
In clause 133, new section 93(2B), after “subsection (2)”
(page 79, line 25), delete “,”
.
Clause 136
After clause 136(6) (page 81, after line 6), insert:
(6B)
Replace the definition of tax law with:
tax law—
(a)
means—
(i)
a provision of an Inland Revenue Act other than the Unclaimed Money Act 1971, or an Act that such an Inland Revenue Act replaces:
(ii)
an Order in Council or a regulation made under another tax law:
(iii)
a non-disputable decision; and
(b)
includes,—
(i)
in relation to an obligation to provide a tax return or a tax form, a provision of the Accident Rehabilitation and Compensation Insurance Act 1992, the Accident Insurance Act 1998, or the Accident Compensation Act 2001, or a regulation made under any of those Acts:
(ii)
when the Commissioner is acting as agent for the Accident Compensation Corporation, a provision of the Accident Compensation Act 2001 that treats a levy as if it were a tax
Clause 169
After clause 169(1B) (page 91, after line 7), insert:
(1BB)
In schedule 7, part C, clause 33,—
(a)
in subclauses (3)(b) and (c), (4)(b), (c), and (d), (7), and (8)(a) and (c), delete “formally”
:
(b)
in subclause (3)(d), delete “formal”
:
(c)
after subclause (4), insert:
(4B)
When the Commissioner has communicated information under subclause (5) about a taxpayer and an amount of reportable unpaid tax to which subclause (3) or (4) applied (the original RUT) and the taxpayer subsequently has 1 or more additional amounts of reportable unpaid tax, subclause (5) also applies to those additional amounts of reportable unpaid tax.
(4C)
Subclause (4B) does not apply to an additional amount of reportable unpaid tax if the taxpayer has repaid in full the original RUT and any amounts of reportable unpaid tax to which subclause (4B) has previously been applied.
(d)
replace subclause (12)(a)(i) with:
(i)
that results from—
(A)
liability for or excess refunds of income tax, excluding refunds under section MF 5 or MF 6 of the Income Tax Act 2007, or is otherwise the overpayment or over-crediting of WFF tax credits; or
(B)
liability for or refunds of GST, amounts required to be deducted under the PAYE rules, amounts required to be deducted under the Student Loan Scheme Act 2011, amounts required to be deducted under the Child Support Act 1991, ESCT, RSCT, or any tax credits under Part L of the Income Tax Act 2007 excluding tax credits under section LB 4 of that Act; and
(e)
repeal subclause (12)(a)(ii).
In clause 169(1C)(b), new schedule 7, part C, clause 38(2), replace “employee”
(page 91, line 12) with “employee,”
.
In clause 169B(2), new schedule 8, part B, clause 2(4)(d), replace “70,000”
(page 91, line 28) with “78,100”
.
Clause 173
After clause 173 (page 92, after line 13), insert, as subclause (2):
(2)
In section 4(1), in the definition of salary or wages, in the words before the paragraphs, replace “section RD 5(1)(a) to (c)”
with “section RD 5(1) and (1B)”
.
Clause 180A
In clause 180A, replace “Sections 180 and 180B”
(page 93, line 10) with “Sections 180AB to 180B”
.
New clauses 180AB to 180AI
After clause 180A (page 93, after line 10), insert:
180AB New section 138A inserted (Loan interest cancelled if instalment arrangement complied with)
After section 138, insert:
138A Loan interest cancelled if instalment arrangement complied with
(1)
This section applies if—
(a)
a borrower is liable to pay loan interest under section 134; and
(b)
the borrower has entered into an instalment arrangement in accordance with section 154(1B) to repay an agreed amount; and
(c)
the borrower has met all their obligations under the instalment arrangement.
(2)
The Commissioner must cancel any loan interest that is calculated and accrued from the date the instalment arrangement is entered into until the date the agreed amount is repaid in full.
(3)
If loan interest is cancelled under subsection (2),—
(a)
the borrower’s loan balance is decreased by the amount of the cancelled loan interest if the loan interest has been added to the borrower’s loan balance under section 135(2); and
(b)
the borrower’s consolidated loan balance is decreased by the amount of the cancelled loan interest if the loan interest has been calculated and accrued under section 135(1) but not yet charged and added to the borrower’s loan balance.
180AC Section 141 amended (Late payment interest reduced if instalment arrangement complied with)
Replace section 141(1)(b) with:
(b)
the borrower has entered into an instalment arrangement in relation to either—
(i)
the unpaid amount in accordance with section 154(1); or
(ii)
an agreed amount in accordance with section 154(1B) and section 141B does not apply because the borrower does not meet all their obligations under the instalment arrangement.
180AD New section 141B inserted (Late payment interest cancelled if instalment arrangement complied with)
After section 141A, insert:
141B Late payment interest cancelled if instalment arrangement complied with
(1)
This section applies if—
(a)
a borrower is liable to pay late payment interest on an unpaid amount under section 139; and
(b)
the borrower has entered into an instalment arrangement in accordance with section 154(1B) to repay an agreed amount; and
(c)
the borrower has met all their obligations under the instalment arrangement.
(2)
The Commissioner must cancel any late payment interest that is charged from the date the instalment arrangement is entered into until the date the agreed amount is paid in full.
(3)
If late payment interest is cancelled,—
(a)
the borrower’s consolidated loan balance is decreased by the amount of the cancelled late payment interest; and
(b)
if the late payment interest has been added to the borrower’s unpaid amount under section 139, the borrower’s unpaid amount is decreased by the amount of the cancelled late payment interest.
180AE Section 145 amended (Application for different types of relief for borrower)
(1)
Before section 145(1)(a), insert:
(aa)
relief from loan interest (see section 145A):
(2)
In section 145(2), replace “subsection (1)(a)”
with “subsection (1)(aa), (a), or (ab)”
.
180AF New cross-heading and section 145A inserted
After section 145, insert:
Relief from loan interest
145A Commissioner may grant relief from loan interest
(1)
This section applies if a borrower—
(a)
has been charged with loan interest; and
(b)
has agreed with the Commissioner an amount required to repay their consolidated loan balance in full; and
(c)
applies under section 145(1)(aa) for relief from loan interest.
(2)
The Commissioner may, having regard to the circumstances of the case and if the Commissioner considers it equitable to do so, write off as much of the loan interest as the Commissioner considers equitable.
(3)
If loan interest is written off,—
(a)
the borrower’s loan balance is decreased by the amount of the written-off loan interest that is loan interest that has been added to the borrower’s loan balance under section 135(2); and
(b)
the borrower’s consolidated loan balance is decreased by the amount of the written-off loan interest that is loan interest that has been calculated and accrued under section 135(1) but not yet charged and added to the borrower’s loan balance.
(4)
The Commissioner may reverse a write-off if the amount was written off due to false or misleading information provided by the borrower.
180AG Section 154 amended (Application for instalment arrangement)
After section 154(1), insert:
(1B)
If a borrower agrees with the Commissioner an amount required to repay their consolidated loan balance in full and applies for relief under section 145(1)(aa) or (a), the borrower may apply for entry into an instalment arrangement for that agreed amount. The application must be made in accordance with section 177(1)(b) of the Tax Administration Act 1994.
180AH Section 184 amended (Challenge to decision concerning relief)
(1)
Before section 184(1)(a), insert:
(aa)
relief from loan interest under section 145A:
(2)
In section 184(2), after “section”
, insert “145A,”
.
180AI Section 196 amended (Cancellation of interest if consolidated loan balance repaid early)
(1)
In section 196(1)(a), after “a borrower of the”
, insert “amount required to repay the”
.
(2)
In section 196(1)(b), replace “consolidated loan balance”
with “amount”
.
New cross-heading and clause 181B
After clause 181 (page 93, after line 34), insert:
Amendment to Accident Compensation Act 2001
181B Amendment to Accident Compensation Act 2001
(1)
This section amends the Accident Compensation Act 2001.
(2)
Replace section 245(2) with:
(2)
The Commissioner must, for an agreed collection fee, pay to the Corporation—
(a)
the actual amount of the levies, and any penalties in respect of those levies, collected by the Commissioner; or
(b)
if the actual amount cannot be accurately determined, an amount calculated in accordance with a formula agreed between the Commissioner and the Corporation.
(3)
Replace section 245(3) with:
(3)
The formula must provide for a close approximation of the amount of the levies and penalties collected based on previous years’ collection rates.
(3A)
The Commissioner must pay the amounts payable under this section to the Corporation on the dates agreed between the Commissioner and the Corporation. As far as reasonably practicable, these dates must align with the timing of payments received by the Commissioner from employers.
Explanatory note
This Amendment Paper amends the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill (the Bill).
Thin capitalisation settings for infrastructure investment
The Amendment Paper proposes amendments to the thin capitalisation rules in the Income Tax Act 2007 to introduce a targeted exemption for certain infrastructure investment.
The thin capitalisation rules limit the amount of interest that foreign investors can deduct on debt used to fund their New Zealand investments. While these rules generally operate as intended to protect the New Zealand tax base, they can be too restrictive for some infrastructure projects. High levels of third-party debt can arise in some infrastructure projects and businesses because they tend to be capital intensive. However, the investment usually has stable cashflows backed by long-term contracts or service agreements. Under the current rules, some interest deductions may be denied even though the levels of debt may not be considered excessive in commercial terms.
The proposed amendments in new clauses 11B, 69B, and 69C would introduce a new elective rule that would allow an eligible infrastructure entity to deduct interest on qualifying debt without a thin capitalisation income adjustment. The exemption would apply only where the debt is genuine third-party debt and the lender’s recourse is limited to the assets and income of the infrastructure entity. These requirements are intended to ensure that the level of debt is commercially supportable on a standalone basis and that the exemption cannot be used to substitute related-party debt for equity.
To qualify, an entity must carry on a business or project in New Zealand that primarily involves creating, operating, maintaining, or upgrading qualifying infrastructure assets. The entity’s assets must be almost entirely attributable to those activities, and the entity must not have foreign operations or investments, subject to limited exceptions. The definition of qualifying infrastructure asset focuses on tangible assets located in New Zealand that provide essential services, such as transport, energy, water, telecommunications, waste, and social infrastructure.
The proposed amendments would apply for the 2026–27 and later income years.
Student loans — discretion to provide relief from interest
Interest charged on student loans can be a significant driver of debt accumulation over time. For some overseas-based borrowers, accrued interest has resulted in debts becoming so large that they disengage from Inland Revenue altogether. The Commissioner of Inland Revenue can currently only provide relief from late payment interest on student loans (that is, interest that applies when a borrower does not make a payment on time). The Commissioner does not have the discretion to provide relief from interest charged on student loans more generally (that is, interest that applies when a borrower is overseas based).
The proposed amendments in new clauses 180AB to 180AI would give the Commissioner the discretion to provide some relief from interest. The discretion would be broad in nature and exercisable when the Commissioner considered relief was equitable. To qualify for any relief, the loan would have to be repaid in full, either in a lump sum payment or through a short-term instalment arrangement. Both loan interest and late payment interest would be cancelled for the period of the instalment arrangement, provided the borrower met all their obligations under the arrangement.
Aligning tax payments by NZSF with similar taxpayers
The Amendment Paper proposes to allow the New Zealand Superannuation Fund (NZSF), the Venture Capital Fund, and certain wholly-owned Crown companies to pay income tax annually rather than by way of provisional tax.
Because the NZSF’s investment income is highly volatile, it is difficult to accurately estimate provisional tax. This can result in significant overpayments or underpayments, creating inefficiencies for both the NZSF and the Crown. The proposed amendments in new clauses 81B, 82B, and 93B would align the treatment of these entities with comparable investment vehicles that pay tax on an annual basis.
The proposed amendments would apply for the 2026–27 and later income years.
Income tax debt pilot with tax pooling industry
Tax pooling intermediaries facilitate the payment of tax by pooling tax payments and provide a mechanism to offset underpayments and overpayments of provisional tax between taxpayers. This can result in more favourable interest rates than standard use of money interest rates and help mitigate late payment penalties.
Under current rules, tax pooling cannot generally be used for any tax or use of money interest more than 75 days after a taxpayer’s terminal tax date. The Amendment Paper proposes a pilot scheme to allow tax pooling funds to be used for historical income tax debt from the 2022–23 and 2023–24 income years. Under the proposed new provision in new clause 93C, tax poolers would be able to enter contracts for the purchase of tax pooling funds to satisfy income tax debt from either or both of the 2022–23 and 2023–24 income years up until 1 October 2026. Those contracts would have to be settled by 1 October 2027.
Taxpayers would be prohibited from using the pilot when Inland Revenue is taking legal proceedings to recover unpaid tax or if the taxpayer has other debt relating to its employer obligations or goods and services tax or has failed to file prior year returns.
Credit reporting remedials
Credit reporting allows the Commissioner of Inland Revenue to share tax debt information with approved credit reporting agencies. The Amendment Paper would introduce two proposals to amend the credit reporting provisions.
The first proposal, in new clause 169(1BB)(a) and (b), is to remove the requirement that the Commissioner must “formally notify” the taxpayer that they have reportable unpaid tax before being able to credit report the taxpayer. Formal notification means the communication must be in print and personally delivered or sent by registered post. The proposed change would update the rules to reflect modern practices by allowing the Commissioner to notify a taxpayer of the intent to credit report by standard post or by electronic means, such as myIR.
The proposed amendment would apply from 1 April 2026.
The second proposal, in new clause 169(1BB)(c), would clarify that the Commissioner is able to disclose new tax debts that arise after an initial disclosure to an approved credit reporting agency. The existing provisions are clear that the original amount disclosed can be updated with the credit reporting agencies, for example, if a taxpayer makes repayments. However, it is not clear whether the Commissioner can disclose new tax debt to credit reporting agencies if a taxpayer continues to miss tax payments. The proposed amendments would clarify that if a taxpayer has one or more additional amounts of reportable unpaid tax after the original disclosure occurs, the Commissioner would also be able to disclose information about those additional amounts to approved credit reporting agencies.
The proposed amendment would apply from 1 October 2025.
GloBE rules — remedial timing amendment
OECD guidance on the Global Anti-Base Erosion Rules (GloBE rules) published on 5 January 2026 contains simplifications to the rules and establishes a side-by-side system. This system excludes multinational enterprises (MNEs) headquartered in countries with qualified domestic and international tax systems (such as the United States) from the GloBE rules.
New Zealand’s GloBE rules automatically incorporate OECD guidance published before the start of a MNE’s fiscal year. This means the guidance published on 5 January 2026 automatically applies for fiscal years beginning on or after 6 January 2026 (the day after publication). Under current legislation, the guidance and corresponding side-by-side system would not apply until the 2027 fiscal year for MNEs with a December balance date whose fiscal year begins, for example, on 1 January. However, the intention is that it should apply for the 2026 fiscal year in these circumstances.
The proposed amendment in new clause 75K is required to set the application date for this guidance to the date specified by the OECD. For MNEs with a fixed date fiscal year, for example, 31 December, the new guidance would apply for fiscal years beginning on or after 1 January 2026. For MNEs with a 52–53 week fiscal year, the guidance would apply for fiscal years beginning on or after 26 December 2025.
The proposed amendment would also update the relevant commencement dates within the OECD guidance itself.
Alignment of contractor definition
The Amendment Paper proposes amendments to the Income Tax Act 2007, the Goods and Services Tax Act 1985, and the KiwiSaver Act 2006 to ensure consistent treatment for tax purposes of workers who are treated as engaged under a contract for services for employment law purposes. Recent amendments to the Employment Relations Act 2000 introduced a statutory category of “specified contractor”, under which certain workers are treated as contractors rather than employees for employment law purposes. Without corresponding amendments, this change would create the potential for misalignment between employment law and tax law in determining whether a person is an employee or an independent contractor.
The proposed amendments in new clauses 83B, 83C, 112(2B), and 173(2) would clarify that when a person is treated as engaged under a contract for services under the Employment Relations Act 2000, or under other legislation that deems a person not to be an employee, that person would be treated consistently for tax purposes. As a result, affected workers would continue to be able to deduct expenditure incurred in earning their income and would remain eligible to register for goods and services tax if they meet the relevant statutory requirements. The proposed amendments do not alter the existing treatment of schedular payments or withholding tax and would apply from the same date as the employment law changes.
GST and bad debt deductions
The Amendment Paper proposes a technical amendment in new clause 128BA to clarify the GST treatment of bad debt deductions claimed by liquidators, receivers, and other specified agents.
The proposed amendment would ensure that bad debt deductions claimed by a specified agent in respect of supplies made before the agent’s appointment may be set off against tax debts that existed before the appointment, consistent with long-standing policy intent.
The proposed amendment would apply from 10 October 2000.
ACC earners’ levy payments
Inland Revenue collects earners’ levies as part of PAYE deductions as agent for the Accident Compensation Corporation (ACC) and pays those levies to ACC under provisions in the Accident Compensation Act 2001. Those provisions require Inland Revenue to pass on the amounts “received” from employees.
However, Inland Revenue receives information relating to PAYE deductions in aggregate, without separate identification of the ACC earners’ levy component (unlike other items, such as KiwiSaver contributions). This means that Inland Revenue cannot pay to ACC the exact amount of earners’ levies and associated penalties “received” without requiring employers to incur signficant compliance costs amending payroll systems and records.
To closely approximate the actual amounts received by Inland Revenue, Inland Revenue and ACC have developed a formula based on prior year levy recovery rates and a square-up approach, using actual levy recoveries, to determine the amounts of earners’ levies and associated penalties that Inland Revenue pays to ACC.
The proposed amendments in new clauses 136(6B) and 181B would ensure Inland Revenue can pay to ACC the amounts of employee earners’ levies and any associated penalties calculated using this formula.
Water services reform
The Amendment Paper proposes to amend the Income Tax Act 2007 to provide transitional tax relief to ensure that water services reforms do not give rise to unintended income tax liabilities.
Amendments made by the Local Government (Water Services) (Repeal and Amendments) Act 2025 introduced an income tax exemption for water organisations from the 2025–26 income year. However, a change in tax status from taxable to exempt can, in the absence of a specific provision, result in income tax liabilities arising solely because assets cease to be used to derive assessable income, including the recognition of depreciation recovery income.
The proposed amendment in new clause 24B would ensure that no income tax liability arises for a water organisation solely because its income becomes exempt. This gives effect to the intended tax-neutral outcome of the water services reforms.
The amendment would apply for the 2024–25 and 2025–26 income years.
Minor and technical amendments
The Amendment Paper would also make the following minor and technical changes to the Bill:
clause 2 is amended to ensure the commencement dates for several provisions are correct;
clause 16(2) is amended to correct the name of an entity;
clause 39(3) is replaced to clarify the application of the amendment;
clause 75G(7) is amended to clarify the drafting;
clause 84B(3) is amended to clarify the drafting;
clause 95(24C) is amended to correct the name of an entity;
clause 111(6) is deleted because it is redundant;
clause 133 is amended to clarify the drafting;
new clause 169(1BB)(d) and (e) clarifies the drafting;
clause 169(1C)(b) is amended to clarify the drafting; and
clause 169B(2) is amended to correct a figure.
Departmental disclosure statement
The Inland Revenue Department is required to prepare a disclosure statement to assist with the scrutiny of this Amendment Paper. The disclosure statement provides access to information about any material policy changes to the Bill and identifies any new significant or unusual legislative features of the Bill as amended.
A copy of the statement can be found at http://legislation.govt.nz/disclosure.aspx?type=ap&subtype=government&year=2026&no=559&
Regulatory impact statement
The Inland Revenue Department produced two regulatory impact statements on 18 November 2025 and 12 March 2026 to help inform the new policy decisions taken by the Government relating to the introduction of a targeted exemption from the thin capitalisation rules for infrastructure investment and the introduction of a discretion to provide some relief from interest on student loans by the contents of this Amendment Paper.
Copies of these regulatory impact statements can be found at—
"Related Legislation
"Related Legislation
"Related Legislation
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Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Measures) Bill - Amendment paper No 559
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Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Measures) Bill - Amendment paper No 559
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