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September 5, 2022

New Zealand proposes various changes to tax rules around the gig and sharing economy, taxation of cross-border employees, dual corporate residency, and more

  • The Bill proposes extending the Goods and Services Tax (GST) rules for electronic marketplaces to the platform economy (e.g. ride sharing, short term accommodation).

  • The Bill also proposes amendments to the rules that govern employers’ withholding obligations for cross-border employees and nonresident contractors, and the income tax consequences of corporate dual residence, among others.

  • As this Bill also confirms the annual income tax rates, it is expected to be progressed through Parliament and enacted ahead of the end of this tax year (being 31 March 2023).

  • The Bill is subject to public consultation and further government review and may be modified before it is finalized.

Executive summary

The New Zealand Government has released the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill. This Bill contains a number of anticipated policy and remedial changes which will have wide-ranging impacts across a multitude of sectors. The Bill is large and contains many proposed amendments including to the Goods and Services Tax (GST) rules applicable to certain services provided through digital platforms, the rules that govern employers’ withholding obligations for cross-border employees and nonresident contractors and the income tax consequences of corporate dual residence, among others.

This Alert summarizes some of the more significant proposed policy changes but does not cover all the various remedial amendments proposed. This Bill also confirms the annual income tax rates, as such it is expected to be progressed through Parliament and enacted ahead of the end of this tax year (being 31 March 2023).

We advise caution in relying on the proposals as introduced, given that the Bill will be subject to further public consultation through the Finance and Expenditure Select Committee, as part of the usual New Zealand legislative process. This means that many of the proposals in the Bill may be altered in response to submissions. Please reach out to the New Zealand tax policy team (listed at the end of this Alert) for the latest updates on the status of these proposals.

Detailed discussion

GST treatment of services provided through digital platforms

The Bill proposes to extend the current GST rules applicable to certain offshore and New Zealand based electronic marketplaces to include certain additional services provided through digital platforms. If progressed the Bill would apply GST to services provided through digital platforms including accommodation, ride-sharing, and beverage and food delivery services, from 1 April 2024. This extension would require marketplace operators to collect and return GST on these services provided through electronic marketplaces and represents a significant change in the onus of GST compliance for platform providers (as it is currently the underlying supplier’s responsibility to account for the GST).

The Bill also proposes a GST flat-rate credit regime to allow GST on costs to be recognized in part for service providers who are not GST registered (typically due to their annual supplies falling below the mandatory GST registration threshold of approx. US$37,000 (NZ$60,000)). This proposal would require platform providers to differentiate between service providers that are GST registered (and who therefore account for their own costs) and those who are not GST registered (to whom the flat-rate credit would apply) and will likely result in increased complexity for the platform providers.

The Bill further proposed to implement the OECD1 information reporting and exchange framework from the 2024 calendar year. In effect, digital platforms would be required to conduct certain due diligence procedures for sellers on their platform, collect and collate information, and report this to Inland Revenue. The information would relate to a calendar year and would need to be provided by 31 January following the end of the calendar year. The first information reporting would be required in early 2025, and penalties could apply for failure to comply with these obligations.

The Bill makes several other important GST related changes including amendments to reduce complexity in the apportionment and adjustment rules as well as changes to simplify the New Zealand GST invoicing requirements.

For further details, see our GST-specific EY Global Tax Alert, New Zealand proposes various changes to Goods and Services Tax Law, dated 30 August 2022.

Cross-border employee tax obligations

Employees working in New Zealand for nonresident employers (whether as a remote worker, a business traveler or on assignment to a New Zealand business) face different compliance circumstances as compared to employees of resident employers. Typically, the New Zealand employment tax rules impose both withholding and extensive information disclosure requirements on employers if an individual is present in New Zealand for longer than 92 calendar days. For many nonresident employers limited information access and challenges in tracking the duration of stay of their cross-border workers can lead to additional complexity in satisfying these compliance requirements.

The Bill proposes several amendments that would acknowledge these challenges, providing additional compliance flexibility in a bid to reduce the cost of compliance with the general rules. These amendments should also go some way towards simplifying the process of error correction. At present compliance errors in this context are typically corrected through a voluntary disclosure process which can be both complex and costly, as well as raise reputational concerns for many taxpayers.

Specifically, the Bill would enable employers to:

  • Meet or correct their employment tax (payroll tax, fringe benefit tax, and superannuation tax) obligations within a 60-day grace period where they have taken reasonable measures to manage their employment-related tax obligations.

  • Apply to the tax authorities for an agreement that the tax due for a payroll tax payment may be made by 31 May following the end of the tax year.

  • Make use of a new “safe harbor” threshold for certain nonresident employers who wrongly assess their liability under the rules providing a shelter from penalties and interest.

Many of the same simplifications would apply for payers of certain nonresident contractors. Further changes would also broaden the ability of these payers to access nonresident contractors’ tax withholding exemptions.

These changes represent a significant initial step towards reducing the practical complexity of withholding taxes for cross-border workers. The various proposals have different application dates but broadly most are expected to apply from either 1 April 2023 or 1 April 2024.

Dual-resident company changes

New Zealand corporate law allows for company directors to be based out of Australia, given the close economic ties between the two countries. Following an Australian High Court judgment in 2019, the presence of directors in Australia took on a greater significance for the purposes of determining Australian corporate tax residence under the central management and control test. As a consequence, a risk arose that some New Zealand companies that are managed by Australian-based directors could also be considered Australian tax resident (i.e., be considered dual resident).

A dual-resident company is unable to access many favorable tax regimes in New Zealand, including the ability to form a consolidated tax group, offset income tax losses against the profits of other group companies, and retain their imputation credit account (ICA) balances. The Bill proposes to allow certain dual resident companies to be broadly eligible for all these regimes thereby reducing the negative tax consequences that can flow from a finding of dual residency.

The amendments would take effect from 15 March 2017, ensuring the Australian change in interpretation would have no effect for New Zealand tax purposes. While the law in Australia is expected to be clarified in due courseNew Zealand companies will welcome the proposed amendments which more immediately provide for greater certainty.

Changes aimed at incentivizing build-to-rent (BTR) developments

In 2021 the Government introduced rules to limit deductions for interest incurred on loans over most residential properties in a bid to quell demand for investment into residential property in New Zealand. At the same time exemptions were included for new builds broadly allowing developers to continue to claim deductions for a period of 20 years for any dwellings completed on or after 27 March 2020.

To ensure the settings do not discourage the development of a BTR sector in New Zealand, the Government has now proposed an additional specific retrospective exemption from the interest limitation rules for certain BTR developers. BTR developers will be able to claim interest deductions, regardless of when their development was completed, if they meet the following criteria:

  • The development is land owned by the same person which contains 20 or more dwellings.
  • Each dwelling is or will be used for the purposes of providing tenancy.
  • The tenancies offered may be, at the prospective tenant’s discretion, of a length of 10 years with 56-day notice of termination.
  • The tenancy allows, without penalty, tenant personalization for the dwelling.

A dwelling would qualify for the exemption “to the extent” to which it meets the requirements above. This means that land that has a mix of commercial and residential premises in the same development, can still access deductions in relation to loans over qualifying parts. Developers would have until 1 July 2023 to agree policies with their current tenants in order to remain eligible for any existing BTR developments. New BTR developments would continue to qualify for the “new build” exemption, described above.

Fringe benefit tax (FBT) on public transport tickets and vouchers

The Bill also proposes that from 1 April 2023 contributions made by an employer to their employee’s public transport costs for travel between home and the workplace would no longer be considered an unclassified fringe benefit. This would in effect exempt from fringe benefit tax subsidized transport in the form of a voucher or a loaded electronic ticketing card, for example. The Government is hopeful that this proposal will provide greater neutrality with employer provided car parking, which is often also excluded from FBT.

While we see the proposal as a step in the right direction, in terms of ensuring tax settings do not unnecessarily hinder shifts to more sustainable transport modes, it is important to note the limited nature of this relief. Employers looking to provide support for staff to use public transport would need to provide vouchers or tickets, as payroll tax is still broadly applicable to cash allowances in New Zealand including those targeted at providing access to public transport. This may limit the application of the proposal. At present the New Zealand Government is broadly subsidizing 50% of the cost of public transport more broadly, until 31 January 2023 in a bid to address the rising cost of living and broader impact of inflation.

Next steps

The Bill will be open to public submissions and select committee hearings, with a report back expected in early 2023. Following any further amendments, this Bill is then expected to progress through to enactment before 31 March 2023.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Limited (New Zealand), Tax Policy, Auckland



  1. Organisation for Economic Co-operation and Development.

  2. As part of the October 2020 Federal Budget, the previous Australian Government announced that it intended to enact retrospective legislation to effectively return the test back to its original interpretation. This legislation has not yet been enacted.


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