Executive summary

The New Zealand Government introduced new draft tax legislation on 26 August 2024 (Tax Bill or Bill).¹ The Bill primarily contains amendments aimed at clarifying the law and reducing compliance costs for taxpayers. A wide array of changes are proposed, including amendments:

• Introducing standardized tax relief measures that can be switched on during future emergency events
• Adopting the OECD's² crypto-asset reporting framework
• Addressing two issues affecting the transfer of overseas pension and superannuation funds to New Zealand
• Several other changes and remedial amendments

The Bill has passed its first reading in Parliament and has been referred to the Finance and Expenditure Select Committee, which has called for public submissions on the Bill by 9 October 2024.

Detailed discussion

Emergency response measures

The Bill's headline item proposes the introduction of standardized emergency response provisions aimed at improving the New Zealand Inland Revenue Department's (Inland Revenue's) ability to provide tax relief during emergency events. This is accomplished by building certain tax relief measures into the legislation, any of which could be activated by an Order in Council, rather than requiring primary legislation to be passed under urgency.

The amendments are proposed to take effect on 1 April 2025 and will rely on existing definitions of "emergency" and the declarations of an emergency under other legislation. Measures proposed by the Bill that will be able to be switched on upon the occurrence of an emergency event include:

• Turning off the bright-line and other land-based timing tests for those who have had their land purchased by the Government or a local authority following an emergency event
• Providing taxation rollover relief (deferral of unexpected income resulting from an insurance payout on a destroyed asset, provided the taxpayer replaces the asset within five years) for certain types of property
• Making various depreciation amendments associated with rollover relief

Given the increasing incidence of emergency events such as flooding, these amendments should provide faster tax relief and greater certainty for taxpayers in times of crisis.

Crypto-asset reporting framework

The Bill includes provisions to adopt the OECD's Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard (CARF) in New Zealand. CARF is aimed at increasing transparency around crypto-asset ownership by providing for the collection and automatic exchange of information on crypto assets.

The amendments propose to incorporate CARF by reference into New Zealand's tax legislation, although the effects of future changes to CARF would be able to be blocked if necessary.

Under the proposed amendments:

• From 1 April 2026, New Zealand-based reporting crypto-asset service providers will be required to collect information on the transactions of reportable users that operate through them.
• The information must then be reported to Inland Revenue on an annual basis, with the reporting period being the 1 April to 31 March tax year. The information is due with Inland Revenue by 30 June following the tax year to which it relates.
• For the first reporting year, the information must be reported to Inland Revenue by 30 June 2027, allowing Inland Revenue to exchange this information with other tax authorities by 30 September 2027.

New Zealand's proposed adoption of these rules is perhaps unsurprising, particularly given the increased focus on crypto assets recently signaled by Inland Revenue.³

Transfer of overseas pension funds

Changes are proposed to address two issues affecting the transfer of overseas pension and superannuation funds to New Zealand by:

• Providing for a "scheme pays" option from 1 April 2026 to allow a person transferring their overseas pension fund to certain New Zealand superannuation schemes to elect to have the New Zealand scheme pay the tax due on the transfer on the person's behalf
• Allowing, from 1 April 2025, certain currently "locked-in" funds originally transferred from the United Kingdom (UK) to a New Zealand KiwiSaver⁴ scheme to be transferred to a New Zealand qualifying recognized overseas pension scheme (QROPS) to allow for the balance of the person's funds in the KiwiSaver scheme to be managed without UK tax implications

Other changes

The Bill also proposes numerous other changes, such as:

• Allowing retrospective registration of securities for the 2% approved issuer levy withholding rate (AIL),⁵ provided certain criteria are met; retrospective registration will be available from 1 April 2025 and will not able to be backdated before that date
• Introducing remedial amendments for limited partnerships, including allowing nonresident partners to access AIL in some cases
• Providing a number of remedial goods and services tax (GST) changes, many of which are aimed at easing compliance costs for taxpayers
• Making changes intended to clarify aspects of the Portfolio Investment Entity (PIE) eligibility criteria

Next steps

The Bill is expected to be enacted by 1 April 2025, although the proposals contained in the Bill are subject to change during the Parliamentary process. Public submissions on the Bill can be made until 9 October 2024.