New Zealand

Budget 2026

Finance Minister Nicola Willis announced the Government’s 2026 Budget on 28 May 2026. Budget 2026 reflects rising economic uncertainty in domestic fiscal consolidation through cost savings, investment in health, education, transport and defence, as well as a number of revenue-raising measures balanced against targeted tax simplifications intended to reduce compliance costs and ease the impact on businesses and taxpayers.

More significant proposals include changes to the charities and not-for-profit (NFP) sector, treatment of shareholder loans, foreign investment fund (FIF) rules, financial arrangement (FA) rules, fringe benefits tax (FBT) regime and the banking sector, as well as administrative changes to the research and development tax incentive (RDTI) and non-resident contractors’ tax (NRCT) regimes and to the Working for Families Scheme.

More details on tax measures included in Budget 2026 are outlined below and in subsequent sections as appropriate. You can also read our Tax Tips publication from the time of the Budget announcements here: https://www.pwc.co.nz/insights-and-publications/regular-publications/tax-tips/budget-2026-potpourri-of-targeted-tax-changes.html

Charities, donations, not-for-profit (NFP) sector

Following a lengthy period of consultation since the release of the initial issues paper in February last year, Budget 2026 announced a range of changes that are proposed to apply to the sector going forward.

Budget 2026 proposes to increase the tax-free threshold for NFPs to NZD 10,000 from the 2027–28 income year on a cliff-edge basis, meaning NFPs with income above NZD 10,000 would not be eligible and all income would be taxable. Budget 2026 also proposes a legislative filing exemption for taxable NFPs with income of NZD 10,000 or less unless Inland Revenue specifically requests a return, an increase from the NZD 1,000 threshold in the current operational guidance. The filing exemption would apply from the 2027–28 income year, while financial institutions would be required to provide Inland Revenue with interest income information for RWT-exempt customers from 1 April 2028.

Budget 2026 also confirms the Government’s intention to progress a legislative change ensuring membership subscriptions and levies received by taxable NFPs, such as clubs and societies, remain non-taxable. This provides welcome certainty for organisations that rely on member funding as a core source of income, particularly in light of recent discussion about Inland Revenue’s interpretation of the current law.

Further changes in relation to donation tax credits (DTC) are discussed in the Individual section.

See the Other tax credits and incentives section for more information. 

Fringe benefit tax (FBT)

Following consultation undertaken in early 2025, Budget 2026 includes a number of FBT proposals including a significant simplification of the rules for motor vehicles.

The key proposal is to replace the current day-counting approach with a category-based method whereby employers would select a vehicle-use category upfront based on the nature and extent of private use and apply the corresponding prescribed inclusion rate to calculate their FBT liability.

Other proposals also include updated rates for valuing motor vehicles for FBT purposes, including separate rates for standard, hybrid and electric vehicles.

Foreign investment funds (FIFs) and the revenue account method (RAM)

The FIF regime applies to New Zealand tax residents with interests in certain foreign entities (that are not controlled foreign companies). You can find further details on the FIF regime in the Group taxation section.

The government has progressed efforts to modernise FIF rules to make New Zealand more attractive to migrants, as reflected by the introduction of the ’revenue account method‘ (RAM) allowing qualifying new migrants to calculate FIF income on a realisation basis.

Qualifying migrants include natural persons who become New Zealand tax resident on or after 1 April 2024, provided they were non-resident for at least five years before becoming a New Zealand tax resident. RAM may also apply to family trusts where the principal settlor meets the same criteria.

Under the RAM, eligible taxpayers are taxed on dividends received and 70% of any realised gain on disposal of qualifying foreign shares. Similarly, 70% of a loss on disposal is able to offset future RAM gains. As an integrity measure, losses cannot be offset against dividend income, but they can be carried forward. The RAM is generally be limited to shares held by qualifying new migrants in foreign companies acquired before becoming a New Zealand tax resident and generally excludes listed shares and most managed funds. Eligible taxpayers need to elect to apply the RAM.

Budget 2026 proposes to expand the RAM to apply to all New Zealand residents. Additional Budget 2026 proposals for FIFs include an increase to the de minimis threshold for overseas investments from NZD 50,000 to NZD 100,000, expansion of the attributable FIF income method, and clarification of the 10-year FIF exemption for New Zealand companies which migrate offshore.

Implementation of the Global Anti-Base Erosion (GloBE) Rules

New Zealand implemented the GloBE Rules, a key component of the Organisation for Economic Co-operation and Development’s (OECD’s) Two-Pillar Solution to address the tax challenges of digitalisation of the economy, for income years commencing on or after 1 January 2025.

As a result, additional compliance obligations will arise for multinational groups subject to the Pillar Two rules with a New Zealand subsidiary, branch, or permanent establishment (PE). These include: 

• Registering with Inland Revenue to confirm the group falls within scope, within six months after the end of the first applicable tax year (e.g. by 30 June 2026 for December balance date groups);

• Filing an annual NZ ‘top-up’ tax return disclosing any top-up tax payable;

• Submitting the Pillar Two / GloBE Information Return, if the group files it in a jurisdiction that lacks an exchange of information agreement with New Zealand.

The potential NZD 100,000 penalty for failing to meet New Zealand Pillar 2 registration means New Zealand taxpayers should be making sure they have assessed whether registration is required, and completing the registration before the relevant due date if it is. 

See the Taxes on corporate income section for more information.

Thin capitalisation for infrastructure

As of April 2026, a new thin capitalisation rule applying to infrastructure projects now serves to allow deductions to which would otherwise be restricted by the general inbound thin capitalisation rules. Under the new rules, interest costs are allowed to be deducted provided certain conditions are met. These include criteria around the entity making the deduction, the activities performed by that entity, the resulting assets, and the characteristics of the debt.   

See more details in our Tax Tips here:  https://www.pwc.co.nz/insights-and-publications/regular-publications/tax-tips/tax-bill-update.html 

Double tax agreements (DTAs)

New Zealand is currently negotiating new and updating DTAs with Australia, Fiji, Germany, Hungary, the Netherlands, Portugal, Slovenia and South Korea. New Zealand has DTAs negotiated with Belgium, Croatia, Iceland and the United Kingdom that have been signed but are not yet in force, with an effective date to be determined.