Budget 2026: Government faces pressure to ease quasi-wealth tax on offshore investments
Prime Minister Christopher Luxon and Revenue Minister Simon Watts are expected to unveil technical tax changes in the Budget. Photo / Mark Mitchell
Accountants are hopeful the Government will use the Budget to do something about the quasi-wealth tax those with offshore investments are currently paying.
As it stands, most people with more than $50,000 directly invested in assets offshore, including shares in companies listed on stock exchanges, need to pay tax on a portion of the value of their investments, regardless of whether they receive income from those investments or not.
Those who invest in shares in New Zealand companies or New Zealand-domiciled funds only need to pay tax on the income they receive from their investments.
While the rules were designed some years ago to incentivise investment in New Zealand, they are a headache for retail investors who need to navigate two different tax systems.
They can also sting those with very large offshore investments, including the wealthy foreigners the Government is trying to attract to New Zealand.
Hence, Deloitte tax partner Robyn Walker is among those who want the Government to change the Foreign Investment Fund (FIF) regime as part of its Budget.
A bill was passed in March to tweak the regime to give some migrants and expat New Zealanders the option of using a different method to calculate the tax they pay on their offshore investments, should they wish to avoid paying a quasi-wealth tax.
The Government said it would keep looking at how further changes could be made to benefit a wider pool of people, including the regular New Zealanders who buy shares in offshore companies.
It said it would also look at lifting the FIF regime’s $50,000 threshold, acknowledging the fact this has been the same for more than 25 years.
Asked on Tuesday morning whether he would further modernise the FIF regime, Revenue Minister Simon Watts told the Herald, “We’re looking at options to attract and retain capital and attract and retain talent.
“I can’t say much more in regard to that policy work. It’s still ongoing.”
Before the Government passed its bill to tweak the regime, Walker suggested it go further to give more investors the option of using a different method to calculate how much tax they pay.
She said this would remove a barrier faced by wealthy and highly skilled people who were considering moving to New Zealand.
It would also reduce the incentive for existing New Zealanders to move offshore.
Last year, Sharesies investments lead at the time, Angus Watson, similarly told the Herald he wanted the FIF regime’s $50,000 threshold lifted, so retail investors didn’t need to try to navigate two different sets of tax rules.
Furthermore, Watson was worried the rules disincentivised people from investing directly in companies listed on overseas stock exchanges.
Last year, Inland Revenue consulted with tax experts on making broader changes to the regime.
It will hold a briefing for stakeholders a couple of hours after the Budget is released. It hasn’t held such a briefing on Budget Day in recent years.
The move has made tax experts question whether Inland Revenue is simply taking a new approach towards communicating with stakeholders, or whether tax changes to be announced will be particularly complex.
A spokesperson for Inland Revenue said the online presentation would provide information “on business-as-usual matters in relation to the Budget”.
Chartered Accountants Australia New Zealand’s New Zealand tax lead, John Cuthbertson, said his industry group supported raising the FIF regime’s threshold to $100,000 or more.
“We wouldn’t be surprised to see this announced at the Budget and then introduced later this year in the Annual Rates Tax Bill,” he said.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
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