Employers would no longer need staff to keep logbooks for work vehicles under a tax bill Revenue Minister Simon Watts introduced to Parliament on 10 September, two weeks before the House is due to rise for the election.
The bill carries tax changes first announced in this year’s Budget. The main ones are a new way of taxing work vehicles, a higher threshold before overseas shares are caught by the foreign investment fund rules, and a set of changes for charities, clubs and volunteers.
Watts said the bill would help grow the economy by reducing compliance costs, simplifying rules and removing unnecessary obligations. In his release announcing the bill he said, “My aim is for a world-leading tax system, and these sensible changes bring us a step closer to that.”
Fringe benefit tax is paid by employers when staff get perks such as private use of a work vehicle. At present the vehicle part is worked out by counting the days a vehicle is available for an employee’s private use. In the release, which Scoop has published in full, Watts called the replacement a “close enough is good enough” approach. “Rather than requiring detailed records and logbooks, employers would simply choose the category that best reflects how much a vehicle is used privately β substantially lowering compliance costs and unnecessary stress,” he said.
Inland Revenue’s information sheet on the proposal, published on 28 May, sets out how the categories would work. A perk car used mainly for private purposes would pay fringe benefit tax on the full value of the benefit. A branded vehicle used mainly for work but available on days off would pay on 35 percent of it. A branded vehicle used only to commute to the same worksite would pay on 20 percent, and one that travels between several worksites, or a pool car with no private use, would attract no fringe benefit tax at all. An employer would pick a category when handing over the vehicle and would only revisit it if the expected private use changed a lot.
The department gives the example of a Hawke’s Bay highway maintenance company that lets an employee use a branded ute at weekends and on public holidays. Under the current rules the company typically pays fringe benefit tax on 36 days a quarter, which works out at 40 percent. Under the new category it would pay on 35 percent, and the employee would no longer have to fill in a logbook.
Not every number goes down, though. The same information sheet says the rate used to value a standard vehicle for the tax would rise from 20 percent of its cost a year to 22.8 percent, with lower rates of 19.6 percent for hybrids and 17 percent for electric vehicles. Inland Revenue says the rates were calculated in 2025, reflect general increases in the cost of running a vehicle since they were last reviewed in 2009, and have not been adjusted for the fuel crisis. The vehicle changes would apply to benefits provided after 1 April 2027.
Deloitte tax partner Robyn Walker told RNZ the current rules had been criticised for favouring utes. “Currently, the criticism of the FBT rules has been there is an incentive for people to buy utes because a ute was a way into an FBT exemption if the vehicle was only used for home-to-work travel,” she said. She said the new approach looks at how a vehicle is used rather than what it looks like. “So utes, normal cars, EVs are all on an equal footing in terms of being eligible for lower amounts of FBT,” Walker said.
The second big change affects people with shares overseas. At present, investors whose foreign shares cost less than $50,000 do not have to apply the foreign investment fund rules, a threshold Inland Revenue says was last set in 2000. The bill would lift it to $100,000, which the department says would fully account for inflation since then.
All New Zealand residents would also be able to use the revenue account method for unlisted overseas shares, paying tax on 70 percent of gains when shares are sold, plus any dividends, rather than on a deemed return each year. That method was introduced on 30 March 2026 but limited to recent migrants. The share changes would be backdated to 1 April 2026. “So people could increase their investments up to that $100,000 threshold now, but obviously they run the risk that the legislation hasn’t actually been enacted,” Walker told RNZ.
For clubs and societies, the bill would keep membership subscriptions and levies tax-free. Inland Revenue’s charities information sheet says it is updating its interpretation of the law, and if that were finalised many subscriptions and levies would become taxable. The bill would also raise the effective tax-free threshold for smaller taxable not-for-profits from $1,000 to $10,000, a figure the department says had not been reviewed since 1979, and those with income of $10,000 or less would no longer need to file a return.
Donors would be able to get their donation tax credit refunds during the year rather than waiting until it ends, and could ask for the refund to go straight to the charity. Under Inland Revenue’s proposal, not-for-profits would also be able to treat volunteer honoraria as salary or wages, which the department says would cut confusion and compliance costs around PAYE and ACC levies. Eligible businesses, including start-ups, could get Research and Development Tax Incentive payments during the year based on what they expect to be entitled to.
The bill also includes a student loan measure, to stop overseas-based borrowers avoiding enforcement by deliberately avoiding contact from Inland Revenue. It is a narrower step than the tougher rules for overseas borrowers that National promised on 30 August as part of its election campaign.
Time is the bill’s main obstacle. When the Prime Minister announced the election date in January, the Government said it intended the House to rise on 24 September, with Parliament dissolved on 1 October ahead of the 7 November election. That leaves the bill for the next Parliament to finish. Walker expects it to get there. “We would expect the laws to go through the normal process, subject to anything major happening at the election, and be enacted in March 2027,” she said.
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Would a simple category system make life easier for your business, or will the higher vehicle rates eat up the savings? Do you help run a club that pays tax on its income? Tell us what you think in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job π
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