I’m not sure that the Commissioner of Inland Revenue will have made a work-related New Year’s resolution, but if I had to guess at what one might be, I’d suggest “continue at pace with the issue of tax policy and interpretation documents”.
Andrea Scatchard
2025 was a very busy year in the tax development space, with some major consultation on both FBT and tax on charities. Both areas evoke strong feelings on one side or the other and, at least for now, we have not seen any of the material suggested changes acted on.
Leading up to the Christmas break we saw the usual flurry of consultation documents issued with lots of holiday reading for those of us who enjoy such content! A couple of items released pre-Christmas are worthy of comment.
Inland Revenue has recently turned its attention to shareholder current accounts. It’s common for shareholders to borrow funds from their company to manage cash flow or reinvest elsewhere. The concern is that shareholders are accessing funds tax free because the drawings are not being funded from taxed salaries or dividends.
The changes being contemplated, with retrospective effect from 4 December 2025 if enacted, include taxing as dividends any new shareholder loans left unpaid 12 months after the end of the income year. Inland Revenue is also considering taxing outstanding loans when a company is struck off and introducing tougher reporting requirements.
The good news is that existing loan balances will not be affected (although additional drawings will be), and a $50,000 threshold will keep smaller borrowings out of scope. These moves aim to align with international standards and ensure fairness, but will require businesses to keep a closer eye on how shareholder current accounts are managed.
The recent statement on the health and safety FBT exemption is an example of where Inland Revenue’s interpretation starts to feel out of step with reality. It is understandable that gym memberships and general wellness perks don’t qualify for exemptions, but new Inland Revenue guidance suggests that providing employees with safety equipment like hard hats and high-vis gear might not be fully exempt from FBT, unless the items are branded. It also suggests that paying for medical treatment for a work-related injury is a taxable benefit to the employee. Both positions are a little hard to agree with as it is difficult to see a real benefit to the employee.
Moving into the new year I don’t expect Inland Revenue will be slowing down. Staying informed and proactive will be key to navigating what will shape up to be another busy year in the tax space.
It is understandable that gym memberships and general wellness perks don’t qualify for exemptions, but new Inland Revenue guidance suggests that providing employees with safety equipment like hard hats and high-vis gear might not be fully exempt from FBT, unless the items are branded.
