New Zealand Tax Changes — Live Tracker

What changed

Trustee income (income retained in a trust and not distributed to beneficiaries) is now taxed at 39%, up from 33%. This change aligns the trustee rate with the top marginal rate for individuals (39% on income above NZD 180,000), closing the planning opportunity that previously made income retention in family trusts attractive for high-income earners. Beneficiary income retains its existing treatment — distributed to beneficiaries and taxed at their personal rates.

Who it affects

• Trustees of family trusts
• High-income earners using trusts for income splitting
• Trust beneficiaries with tax advisors reviewing distributions
• Accountants managing discretionary family trusts

What to do

Review your trust's income distribution policy with your advisor. If retaining income in the trust previously offered a tax advantage, model the after-tax position under the new 39% rate versus distributing to beneficiaries. Consider whether annual resolutions for discretionary distributions remain optimal or whether the trust structure needs reviewing.

What changed

Properties sold on or after 1 July 2024 are subject to the bright-line test only if sold within 2 years of acquisition. The previous 10-year rule (5 years for new builds) that applied from March 2021 has been repealed. Properties purchased before 27 March 2021 retain the original 2-year test. Properties purchased between 27 March 2021 and 1 July 2024 and held for at least 2 years from acquisition are no longer caught by the bright-line test on disposal.

Who it affects

• Residential property investors
• Property developers
• Landlords considering selling rental properties
• Individuals who bought property between 2021 and 2024

What to do

Calculate your property's acquisition date to confirm whether a sale would fall within the 2-year bright-line window. For properties purchased between 2021 and 2024, confirm you have held the property for at least 2 years before selling. The main home exemption continues to apply — document your use of the property if the exemption may be relevant.

What changed

From 1 October 2021, the previous government denied interest deductions on loans for residential rental properties acquired on or after 27 March 2021, with a phased reduction for existing properties. The current government reversed this policy: 80% deductibility was restored from 1 April 2024, and 100% full deductibility was restored from 1 April 2025. All residential rental property loans now qualify for full interest deductions regardless of acquisition date.

Who it affects

• All residential rental property owners
• Property investors with mortgage-financed portfolios
• New property investors who purchased during the denial period
• Landlords with multiple rental properties

What to do

Ensure your tax return for the year ending 31 March 2025 claims only 80% of interest (the rate applicable for that year). From 1 April 2025, claim 100% of interest as a deduction. Review prior years — if you claimed less than permitted during the phased restoration, you may be able to amend returns. Update your property income calculations and budgets to reflect improved after-tax cash flow.

What changed

The R&D Tax Incentive provides a 15% tax credit on eligible R&D expenditure, capped at a maximum claim of NZD 120 million per year (giving a maximum credit of NZD 18 million). The credit is refundable for most businesses, meaning if it exceeds tax payable, the excess is paid out as a cash refund. Eligible costs include staff costs, contractor costs, and overhead contributions directly related to eligible R&D. Businesses must register for the scheme and submit supplementary returns with their income tax return.

Who it affects

• Companies conducting eligible research and development in New Zealand
• Technology businesses and software developers
• Manufacturers developing new products or processes
• Start-ups with qualifying R&D activities

What to do

Register for the R&D Tax Incentive before the end of the income year — late registration is not permitted. Document all eligible R&D activities contemporaneously, separating eligible from non-eligible expenditure. Submit your Supplementary Return (IR1240) with your income tax return. Callaghan Innovation can provide guidance on whether activities qualify.

What changed

Payday filing replaced the monthly employer schedule (IR348). Employers using payroll software must file electronically within 2 working days of each payday. Employers filing on paper must file within 10 working days. The information required includes employee details, gross earnings, PAYE, KiwiSaver deductions, and student loan repayments for each pay period. IRD now matches this data against employee income tax returns in real time, and the penalty regime for late or incorrect filings is actively enforced.

Who it affects

• All employers paying wages in New Zealand
• Payroll administrators and bookkeepers
• Small businesses managing payroll manually
• Businesses with casual or variable-hour employees

What to do

Ensure your payroll software is configured to file automatically after each pay run. If you process payroll manually, set a calendar reminder for the 2-working-day filing deadline after each payday. Review your employee records for completeness — IRD will reject filings with missing IRD numbers or incorrect tax codes. Check that your KiwiSaver contribution calculations and employer contributions are correctly set up.