International Tax Reforms Continue to Gather Pace

Today, the Government released the Taxation (Annual Rates for 2026–27, FBT Simplification, Foreign Investment Funds, and Remedial Measures) Bill. The Bill introduces the Budget promises which includes a number of international tax measures designed to make New Zealand a more attractive destination for migrants and internationally mobile investors, while also modernising some long-standing tax settings. Several of these changes will be of particular interest to taxpayers with overseas investments, foreign currency assets, and cross-border financing arrangements.

Revenue Account Method Extended and Exit Tax Extension

We have written about the Revenue Account Method (RAM) many times, and here we are again, talking about RAM. This time, the Bill proposes to extend RAM for calculating FIF income to all taxpayers. Originally introduced for certain recent migrants and returning New Zealanders, the Government announced its intention to extend RAM to all New Zealand residents in the budget. The Bill proposes this will take effect from the 2026-27 (current) income year.

The RAM taxes investors largely on realisation rather than annual deemed income, with dividends taxed when received and gains on disposal generally taxable at a discounted rate. The proposal is intended to address concerns that the existing FIF rules can create tax liabilities that are disconnected from actual cash returns. It has long been our position that RAM should be an available option for ALL taxpayers, and we are pleased to see this proposed amendment, and will hope to see this Bill progress to law.  

Alongside the extension of RAM are amendments to the RAM exit tax. This is intended to ensure that gains accrued while an investment is subject to RAM remain taxable when a taxpayer leaves the regime or New Zealand tax base. In line with the extension of the use of RAM, the exit tax will be extended to New Zealand tax residents who will be treated as non-resident pursuant to a double tax agreement. This is a logical extension where the exit tax remains applicable.

FIF De Minimis Threshold Doubled

Another welcome change which was promised in the Budget is the proposed increase in the FIF de minimis threshold from $50,000 to $100,000. Under the current rules, individuals with total attributed FIF interests costing no more than $50,000 can generally remain outside the FIF regime. This threshold is simply outdated. The proposed increase will mean many more investors can hold modest portfolios of overseas shares without needing to calculate FIF income annually.

This will significantly reduce compliance costs and simplify tax reporting obligations. The increase is also expected to reduce the number of taxpayers needing specialist advice solely because they have comparatively small overseas investment portfolios.

Financial Arrangement Rules and Investor Visa Assets

Budget 2026 also included a proposal to amend the financial arrangement rules to better accommodate migrants and offshore investors. A key concern has been that foreign exchange gains and losses arising under New Zealand's financial arrangement rules can create unexpected tax consequences for migrants who continue to hold offshore investments in their home currency.

The Government has proposed excluding certain investments that are held for visa and migration purposes from aspects of the financial arrangement regime. The objective is to ensure that assets acquired as part of meeting immigration investment requirements (such as AIP investors) are not subject to tax outcomes that were never intended and which may discourage migration to New Zealand.

Changes to Approved Issuer Levy (AIL)

The Government has also announced amendments affecting Approved Issuer Levy (AIL), a regime that allows many cross-border interest payments to non-residents to be made without Non-Resident Withholding Tax (NRWT), provided the levy requirements are met.

The changes are intended to modernise the regime and reduce situations where timing and character mismatches arise between interest deductions available to New Zealand borrowers and withholding obligations applying to non-resident lenders. The amendments complement broader work on international financing and financial arrangement rules and are expected to improve the efficiency of cross-border lending arrangements.

Looking Ahead

It is important to note that these measures are currently contained in the Bill but have not yet been enacted. While the Government has clearly signalled its commitment to these changes, the proposals must still complete the legislative process before becoming law.

Given that these reforms were announced as part of the Government's broader strategy to attract internationally mobile capital and talent, there appears to be a strong policy incentive for the current Government to progress the legislation before the election. However, with Parliament approaching an election period and a number of competing legislative priorities, there can be no certainty that all measures will be passed in their current form prior to voters going to the polls.

For now, taxpayers should view the proposed changes as encouraging indicators of the direction of travel rather than enacted law. Until the Bill moves through the process, and ultimately receives Royal Assent, existing FIF, financial arrangement and AIL rules continue to apply.

At Johnston Law, we specialise in the advising on migrant tax issues.  We understand the case law, the Inland Revenue guidance, and most importantly, how to apply them to your unique circumstances.  If you are considering investing in New Zealand, please contact us for tailored advice.

This article is intended for informational purposes only and should not replace specific tax advice. For personalised advice on all tax matters please contact us.

This article was accurate at the time of publishing.