Best of the rest 2025

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Title: Best of the Rest Webinar

Changes coming in April 2025

Audio

Kia ora everyone and welcome to this webinar.

My name is Helen Mitchell with me today is Vicki Cronin. We are both Relationship Managers at Inland Revenue.

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Nau mai

Haere mai

Welcome

Title: Topics

• International changes
• Service Pack changes
• Updated rates
• Miscellaneous changes

Audio

Welcome to our Best of the Rest webinar. In this webinar we’ll be taking you through further changes that are proposed to come into effect on or before 1 April 2025, this will include:

• International changes
• Service pack changes
• Updated rates
• And other Miscellaneous changes that may be of interest.

Before we continue, please note that the information in this presentation is current as at 7 March 2025 and may be subject to change.

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Title: International changes

Image: Close up of a person in sitting at a table writing in a book

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We’ll start by looking at the international changes.

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Title: Approved issuer levy registration

Sub-title: Allow retrospective registration of a security

When an approved issuer levy (AIL) security is not registered due to a genuine error, administrative delay, or extenuating circumstances, borrowers can apply for retrospective registration of the security.

Once registered, AIL can be paid instead of NRWT.

Payment will be able to be made through the use of tax pooling to settle the AIL liability that will arise when the retrospective registration is granted.

Applies from 1 April 2025 and cannot be backdated

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The first change is to the Approved issuer levy registration.

The Commissioner does not currently have the administrative flexibility to allow retrospective registration for Approved issuer levy (AIL) securities.

Where the AIL security is not registered due to a genuine error, administrative delay or extenuating circumstances, borrowers can apply for retrospective registration of the security.

New legislation will provide criteria and factors that will be taken into account when deciding whether to approve a backdated registration.

The proposed legislation outlines several factors to be considered. While no single factor will be decisive on its own, some factors may carry more weight than others.

Once registered, AIL can be paid instead of NRWT.

Payment will be able to be made through the use of tax pooling to settle the AIL liability that will arise when the retrospective registration is granted.

This change will apply from 1 April 2025 and cannot be backdated.

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Title: Foreign tax credit and trust rules

When a beneficiary of a trust is distributed foreign sourced income, they must take in to account any deductions related to that foreign sourced income, as a trustee would have when calculating any foreign tax credit entitlement.

Beneficiaries’ foreign tax credit will be capped at the same level as if the income was retained in the trust.

Additional tax may be payable as a result of the change.

Applies from 1 April 2025

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The next change is the change for foreign tax credit and trust rules.

From 1 April, when a beneficiary of a trust is distributed foreign sourced income, they must take into account any deductions related to that foreign sourced income, as a trustee would have when calculating any foreign tax credit entitlement.

The beneficiaries’ foreign tax credit will be capped at the same level as if the income was retained in the trust.

Additional tax may be payable as a result of the change.

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Title: Thin Capitalisation

Sub-title: In relation to non-debt liabilities

The non-debt liabilities exclusion will be broadened to include interest-free loans from settlors in certain circumstances.

There will be some changes to what will be excluded from the meaning of non-debt liabilities relating to interest-free loans provided by, and redeemable shares held by, a member of equity group.

A new term ‘equity group’ will be introduced to include a corporate member, a non-corporate member and their relatives within two degrees of relationship.

These changes will apply from the 2025-26 income year onwards.

Entities with non-debt liabilities that exceed or are equal to their total assets will be required to reduce their total interest deductions to zero.Backdated to apply from 1 April 2024.

Applies to income years beginning on or after 1 July 2018

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Changes are also being made to the thin capitalisation rule in relation to non-debt liabilities:

The non-debt liabilities exclusion will be broadened to include interest-free loans from settlors in certain circumstances.

There will be some changes to what will be excluded from the meaning of non-debt liabilities. Specifically, interest-free loans provided by, and redeemable shares held by, a member of an equity group will be excluded.

A new term, "equity group," will be introduced to include a corporate member, a non-corporate member, and their relatives within two degrees of relationship

These changes will apply from the 2025- 26 income year onwards

Entities with non-debt liabilities that exceed or are equal to their total assets (effectively insolvent entities) will be required to reduce their total interest deductions to zero.

This change applies to income years beginning on or after 1 July 2018

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Title: Other international changes

Taxation of transfers from overseas pension schemes - will address issues that affect the transfer of pension funds to New Zealand.

Modify/Remove the base erosion and profit shifting disclosure - reduce customers compliance costs the Base Erosion and Profit Shifting disclosure will no longer need to be filed with the annual income tax return where it was required in the past.

Country by Country Reporting - accounts will be visible in myIR and MNEs will be able to submit their CbC reports in myIR. From 1 April 2025, multinational enterprises will need to submit their reports in .xml format through myIR.

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There’s also a handful of other international changes and clarifications.

A change to the taxation of transfers from overseas pension schemes will address issues that affect the transfer of pension funds to New Zealand.

A change for the Base Erosion and Profit Shifting Disclosure will reduce customer compliance costs, as the Base Erosion and Profit Shifting disclosure will no longer need to be filed with the annual income tax return where it was required in the past, and

Country by country accounts will be visible in myIR from mid-March, allowing multinational enterprises to submit their reports in myIR and from 1 April 2025, multinational enterprises will need to submit their reports in .xml format through myIR.

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Title: Other international changes - clarifications

Foreign investment fund cost method eligibility – clarifies that the eligibility to use the cost method to calculate foreign investment fund (FIF) income depends on whether a market value for the investment is readily available.

Interaction between transfer pricing rule and deemed dividend rule – clarifies where the transfer pricing and dividend rules apply and aligns the four-year time bar that currently applies to other adjustments.

Failure to withhold NRWT amount – clarifies the available options for rectifying cases when a person is required to withhold non-resident withholding tax (NRWT) for a payment of passive income but fails to do so.

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A change to the foreign investment fund cost method eligibility will clarify that the eligibility to use the cost method to calculate foreign investment fund (FIF) income depends on whether a market value for the investment is readily available.

A change to the interaction between the transfer pricing rule and deemed divided rule will clarify where the transfer pricing and dividend rules apply and aligns the four-year time bar that currently applies to other adjustments.

The final international change will clarify the available options for rectifying cases when a person is required to withhold non-resident withholding tax (NRWT) for a payment of passive income but fails to do so.

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Title: Service Pack

Image: Office scene of windows and a line of workstations

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Twice a year we deploy a service pack update. These updates allow us to roll out system changes and enhancements that will ensure that our system continues to run smoothly.

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Title: Service pack

Sub-title: System changes and enhancements

When using the reply, edit draft function for web message in myIR, the original message and any attachments will now be included in the reply. 

Selecting the new ‘Unsubscribe for ALL emails’ option in the ‘Manage my email subscription preferences’ menu will stop all optional email notifications.

Within myIR Admins/Owners can view the lockout details, including reasons and unlock options, and see the last login time for secondary logons.

Web requests will show in the ‘Pending’ tab until the submission is fully processed in the system overnight.

Images in myIR will have alternative text, enabling screen readers to assist vision-impaired customers.

Applies from mid-March 2025

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Some changes or enhancements that you may notice from our next service pack update include:

When using the reply, edit draft function for web message in myIR, the original message and any attachments will now be included in the reply. 

Selecting the new ‘Unsubscribe for ALL emails’ option in the ‘Manage my email subscription preferences’ menu will stop all optional email notifications. However, you will still receive mandatory emails, such as a payment due reminders.

Admins/Owners in myIR will be able to view the lockout details, including reasons and unlock options, and see the last login time for secondary logons.

Web requests will show in the ‘Pending’ tab until the submission is fully processed in the system overnight.

Images in myIR will have alternative text, enabling screen readers to assist vision-impaired customers.

These changes will be live following our planned system update in mid-March.

I will now pass you over to Vicki

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Title: Miscellaneous changes

Image: A pile of colourful folders

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Thanks Helen. Now we’ll look at the other changes that may be of interest to you.

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Title: Employer–funded flu vaccinations

Sub-title: Where Employer reimburses employee for flu vaccination payment is not taxable for FBT

Reimbursement amounts paid by an employer to or on behalf of an employee for all non-cash benefits that qualify for the FBT health and safety exemption (e.g. a flu vaccination) would be exempt income for the employee.

This ensures that employers are not worse off if they reimburse an employee for any non-cash benefit that qualifies for the FBT health & safety exemption rather than providing it on their premises or a voucher.

Applies to the 2024-25 and later income years

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The first is the change to how Employer–funded flu vaccinations are reimbursed.

Currently If an employee pays for their own flu vaccination and is later reimbursed by their employer, the cash payment is subject to PAYE.

The change will mean that reimbursement amounts paid by an employer to or on behalf of an employee for all non-cash benefits that qualify for the fringe benefit tax health and safety exemption, would be exempt income for the employee.

This ensures that employers are not worse off if they reimburse for the vaccination rather than if the vaccination was provided at work or received via a voucher to meet the cost.

This change will apply to the 24/25 and later income years. 

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Title: Research and Development Tax Incentive

ICA & shareholder continuity rules. Amended to ensure that when a company’s shareholder continuity is breached between the time the company files the income tax return and the time the RDTI credit is refunded, there is no double imputation debit to the ICA.

Effective from the 2019- 20 income year.

General approval application date

Moving the general approval application due date to the last day of the 3rd month after end of income year/balance date (example: 31 March balance date, 30 June general approval application due date).

Applies from 1 April 2025.

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There are also changes for the Research and Development Tax Incentive

ICA & shareholder continuity rules. Filing for a Research and Development Tax Incentive (RDTI) tax credit creates an imputation credit in the Imputation Credit Account (ICA).

When the tax credit is approved, the ICA then has an equal imputation debit if the tax credit is refunded to the company.

When shareholder continuity in a company is lost, the company’s ICA then has an imputation debit equal to a credit balance added to the account. 

The ICA & shareholder continuity rules are being amended to ensure that when a company’s shareholder continuity is breached between the time the company files the income tax return and the time the RDTI credit is refunded, there is no double imputation debit to the ICA.

Changes to the general approval application date. Most businesses enrolled in RDTI have a 31 March balance date. The general approval application deadline of the year falls on 7 May for these businesses. This is a week after the annual peak for filing supplementary returns for the previous year, which falls on 30 April for taxpayers with an extension of time. This creates a high compliance and administrative burden for businesses and scheme administrators.

The deadline will be extended and move the general approval application due date to the last day of the 3rd month after the end of the income year balance date.

This change reduces compliance costs and pressure due to simultaneously preparing applications and returns.

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Title: Reserve scheme redesign

We will be updating the internal system design for the Reserve Scheme Accounts, Income Equalisation (EQU), and Environmental Restoration (ERA).

You might observe some updates in the ‘look and feel’ when managing reserve schemes in myIR, including:

• New ‘Make a Deposit’ Option
• Documents can now be attached and submitted with EQU and ERA web requests. 
• When withdrawing EQU deposits, the re-deposit option will no longer be available, and deposits cannot be transferred to another EQU account. 
• New letters

Some EQU accounts will be temporarily unavailable in myIR between the evening off Friday 14th March and Monday 31st March 2025 while account maintenance work is completed.

Applies from mid March 2025

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Reserve scheme redesign

Over the weekend of 15th March, we will be updating the internal system design for the Reserve Scheme Accounts, Income Equalisation (EQU), and Environmental Restoration (ERA). This update aims to resolve existing system issues and reduce the manual work involved in managing these accounts. 

You might observe some updates in the ‘look and feel’ when managing reserve schemes in myIR. These changes include: 

• A New ‘Make a Deposit’ Option which can be used instead of the ‘Make a Payment’ function. 
• That documents can now be attached and submitted with EQU and ERA web requests, and 
• When withdrawing EQU deposits, the re-deposit option will no longer be available, and deposits cannot be transferred to another EQU account. 

In addition to these changes, we have developed new letters about: 

• Making deposits 
• Withdrawing amounts 
• Annual interest postings 
• Approaching five-year expiry dates for EQU deposits 

To help these changes transition smoothly, we ask that you don’t submit any non-urgent withdrawal requests for EQU after Wednesday 12th March at 4pm. You can resume withdrawal requests from 8am Monday 17th March 2025. 

After this transition, some information for EQU will be temporarily unavailable online. This is due to account maintenance activities following the system update.

You will be able to view this EQU information in myIR again by 31st March 2025. 

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Title: Two-step verification (2SV) in myIR

Sub-title: Changing from optional to compulsory

Two-step verification (2SV) will become compulsory for all myIR users in a phased implementation, starting from 28 April 2025.

2SV adds a layer of security to your myIR account.

You need to provide a unique security code to verify your identity when logging in to myIR. 

You have the option to use your email and/or an authenticator app to verify your identity.

From 28 April the email address used for authentication is not required to be unique to the web logon.

‘Trusted device’ selections will last 90 days.

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Two-step verification (2SV) in myIR

Two-step verification will become compulsory for all myIR users in a phased implementation over the next year, starting from 28 April 2025.

2SV adds a layer of security to your myIR account.

When 2SV is enabled, you need to provide a unique security code to verify your identity when logging in to myIR. 

You will have the option of using your email and/or an authenticator app to verify your identity.

‘Trusted device’ selections will last 90 days instead of up to 12 months. You will then need to complete the 2SV process again.

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Title: ‘Manage Payments and Returns’ update

From mid March 2025, intermediaries using the 'Manage Payments and Returns' feature in the myIR intermediary centre will experience faster information loading.

Intermediaries can use this feature to manage their clients filing obligations

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A further myIR change will be of interest if you’re an intermediary. From mid March, intermediaries using the 'Manage Payments and Returns' feature in the myIR intermediary centre will experience faster information loading.

Intermediaries can use this feature to manage their clients filing obligations.

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Title: Other changes

Enrolling persons aged under 16 in KiwiSaver - allows young persons under the age of 16 to enrol in KiwiSaver if one of their guardians contracts directly with a provider in the name of the young person. This change applies from 1 July 2025.

Property - amendments to clarify the start date for bright-line and the acquisition date for the other land sales rules. Generally, these do not change for co-owners after the partition or subdivision is completed. Exceptions do apply.

Filing obligations of charities and non profits - ensures that entities that only derive exempt income, such as charities, do not need to file a return of income.

Generic response measures for emergency events – improves Inland Revenue’s ability to provide timely tax relief following emergency events by building certain tax relief measures into the legislation, any of which could be activated by an Order in Council.

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Other changes that are part of our April suite of changes that may be of interest to you include:

Enrolling persons aged under 16 in KiwiSaver. A Kiwisaver change that will allow young persons under the age of 16 to enrol in KiwiSaver if one of their guardians’ contracts directly with a provider in the name of the young person.

Property. Amendments in the property space that clarify the start date for bright-line and the acquisition date for the other land sales rules. Generally, these do not change for co-owners after the partition or subdivision is completed but exceptions do apply.

Filing obligations of charities and non profits. A change to the filing obligations for charities and non profits that will ensure entities that only derive exempt income, such as charities, do not need to file a return of income.

Generic response measures for emergency events. And, our ability to provide timely tax relief following emergency events will improve as we’re building certain tax relief measures into the legislation, any of which could be activated by an Order in Council.

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Title: Other changes

Cash-settled employee share schemes and ACC - clarifies that for ACC purposes, cash-settled ESS benefits are not considered earnings as an employee, or earnings as a shareholder-employee.

Record keeping requirements for gift exempt bodies - clarifies that Gift Exempt Bodies must keep records relating to donations received or applied for at least seven years after the income year to which they relate.

RWT - addresses a number of remedial issues for exempt status. AIL eligibility and other matters relating to partnerships.

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NZBN Information exchange. Inland Revenue will be authorised to share the contact address and tax file numbers of unincorporated entities with the Ministry of Business, Innovation and Employment (MBIE).

Cash-settled employee share schemes and ACC. A change for Cash-settled employee share schemes and ACC will clarify that for ACC purposes, cash-settled employee share scheme benefits are not considered earnings as an employee, or earnings as a shareholder-employee.

Record keeping requirements for gift exempt bodies. A change to the record keeping requirements for gift exempt bodies will clarify that Gift Exempt Bodies must keep records relating to donations received or applied for at least seven years after the income year to which they relate.

RWT. And finally there will be changes for Resident Withholding Tax, around exempt status, AIL eligibility and other matters relating to partnerships that will address a number of remedial issues.

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Image: Inland Revenue logo

www.ird.govt.nz/April-Release

Thank you

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That brings us to the end our Best of the Rest webinar.

If you want to find out more about the other webinars we’re going to be running, go to www.ird.govt.nz/April-Release

Thank you for watching.