TAX & BUSINESS NEWSLETTER JULY 2026

This issue opens with an update on the economic environment and the Reserve Bank's latest interest rate decision, before turning to practical mid-year tax housekeeping and implementation steps following Budget 2026. We also look at Inland Revenue's evolving enforcement focus, employment law and workforce cost changes, and dedicated spotlights on the retail, hospitality, property development, and manufacturing and services sectors, before closing with international tax issues for mobile workers and investors, trust and estate planning themes, and the capital gains tax debate ahead of the November election.

BUSINESS AND ECONOMIC UPDATE - MID-WINTER CHECK-IN

The New Zealand economy remains in a delicate phase, with this year's global fuel shock still feeding through into higher transport and input costs. Higher inflation is colliding with subdued activity, leaving many businesses facing margin pressure rather than being able to fully pass on cost increases.

Since our June newsletter, the Reserve Bank has delivered the first rate hike of this cycle, lifting the Official Cash Rate (OCR) by 25 basis points from 2.25% to 2.50% at its 8 July Monetary Policy Review. The Monetary Policy Committee reached the decision by consensus, judging that policy remained accommodative given inflation still above the 1-3% target band, and signalled that further increases are likely, though the timing is "highly uncertain." Annual headline inflation is now expected to have peaked at 3.9% in the June 2026 quarter - lower than the Bank's earlier forecast, thanks largely to falling oil prices - before easing to 3.3% in the September quarter and returning to the 2% mid-point by mid-2027.

Financial conditions had eased slightly in recent months on lower wholesale rates and a softer New Zealand dollar, and the hike was partly intended to prevent an unwarranted loosening of those conditions. The move was largely priced in by markets, though the NZD strengthened modestly on signals that further tightening lies ahead. Most bank economists expect one or two further 25-basis-point hikes by the end of 2026, taking the OCR toward 3.00%.

Not every part of the economy is moving in the same direction: manufacturing activity reached a five-year high in June, a sign that the slowdown has not been uniform across sectors (see our manufacturing and services spotlight below).

ACTION: The era of rate cuts is over for now. Borrowing costs are likely to rise as loans reprice, and cash-flow planning should assume a higher interest rate environment over the coming year.

MID-YEAR TAX HOUSEKEEPING - AHEAD OF 31 MARCH 2027

With the 2026-27 income year well underway, July and August are sensible months to address core tax housekeeping. Early action can reduce compliance risk and help you take advantage of recent changes designed to streamline obligations.

Key areas to review include:

• Provisional tax: Check whether your current method (standard, estimation, or ratio) still reflects expected income in a slower-growth environment and avoids under- or over-payments.

• GST: Confirm that coding is accurate, mixed-use asset treatment is correct, and any historic errors are identified for voluntary disclosure before Inland Revenue's increased audit activity catches them.

• Shareholder current accounts: Overdrawn balances in companies that may be restructured, sold, or wound up should be assessed in light of new integrity measures (see Budget 2026 below) that will tax unpaid loans as income after liquidation.

• Trust distributions: Ensure resolutions and beneficiary records are robust, and that distribution patterns align with your intended outcomes and Inland Revenue's expectations for high-wealth individuals.

ACTION: Consider a mid-year "mini review" of GST, provisional tax, shareholder loans, and trust distributions now, while there is time to adjust course before 31 March 2027.

BUDGET 2026 - MOVING FROM AWARENESS TO IMPLEMENTATION

Budget 2026 introduced a range of measures aimed at reducing compliance costs, tightening enforcement, and adjusting settings for charities, investors, and R&D-intensive businesses. Most changes were announced on 28 May 2026 via the Taxation (Budget Measures) Bill (No 3) and a wider package to be legislated later in the year. With the initial headlines behind us, July is an ideal time to move into implementation planning.

Points to keep on the radar:

• Donation tax credits: From 1 April 2027, an annual cap of $100,000 will apply to donations eligible for the 33.33% tax credit for individual donors, capping the maximum credit at $33,333. This is currently uncapped. Corporate giving is unaffected.

• FBT simplification: A proposed category-based approach to motor vehicle FBT will replace detailed logbooks with a simpler "close enough is good enough" assessment of private use, and is expected to reduce FBT payable on electric and hybrid vehicles. Businesses should use this as a prompt to review and rationalise vehicle fleets. Changes are proposed to apply to benefits provided after 1 April 2027.

• FIF regime: The de minimis threshold for the foreign investment fund rules is proposed to double from $50,000 to $100,000, and access to the Revenue Account Method (RAM) - currently limited to new migrants and returning New Zealanders - will be extended to all New Zealand taxpayers, giving investors more flexibility in how offshore portfolios are taxed.

• R&D Tax Incentive (RDTI): The cap on eligible internal software development expenditure is being cut sharply, from $25 million to $3 million, while a new in-year (quarterly) payment option will improve cash flow for eligible businesses rather than requiring them to wait until year end.

• Charities and not-for-profits: Budget 2026 confirms integrity measures for trust income allocated to tax-exempt beneficiaries and clarifies that member subscriptions to not-for-profits remain non-taxable, addressing recent uncertainty - relevant for business owners who also sit on charitable or community trust boards.

• Non-resident contractors' tax (NRCT): From 1 April 2027, the NRCT exemption threshold rises from $15,000 to $75,000 in a 12-month period, and a proposed "single-payer" approach means a New Zealand business will generally only need to consider its own contract with an overseas contractor, rather than that contractor's wider New Zealand activity - a welcome simplification for businesses engaging offshore specialists or contractors.

ACTION: Build these changes into your tax and investment planning calendar well before 1 April 2027 so that charitable strategies, remuneration structures, vehicle fleets, and investment decisions can be optimised.

INLAND REVENUE COMPLIANCE - PRACTICAL THEMES

Additional Budget funding for Inland Revenue's audit, compliance, and debt collection work - a further $15 million a year announced in Budget 2026 - is translating into increased activity. We are seeing particular focus on GST returns, PAYE and ESCT reporting, and the management of existing payment arrangements.

Centrix data show company liquidations reached an 11-year high in the year to March 2026, with 3,023 liquidations recorded - construction (768 firms) and hospitality (399, up 49% year-on-year) the hardest hit, and retail liquidations up 34%. Inland Revenue continues to be the largest applicant creditor in corporate insolvencies nationally, and has begun reporting business tax debt to credit agencies, increasing the pressure on cash-strapped firms.

Further areas attracting attention include:

• Under-reported income in closely-held businesses, especially where lifestyle indicators do not match declared income.

• Overdrawn shareholder current accounts in companies approaching liquidation or removal from the Companies Register.

• Trusts with limited documentation or opaque distribution patterns in the context of high-wealth individual reviews.

ACTION: Ensure filings are accurate and timely, and if you have tax debt or complex shareholder or trust arrangements, engage proactively with Inland Revenue and your adviser rather than waiting for enforcement action.

EMPLOYMENT AND WORKFORCE COSTS - MINIMUM WAGE, LEAVE REFORM AND IMMIGRATION

Labour costs remain one of the largest controllable expenses for retail, hospitality, manufacturing, and service businesses, and several settings changed - or moved closer to changing - over the past few months.

Key changes to track:

• Minimum wage: The adult minimum wage rose to $23.95 an hour from 1 April 2026, up 45 cents from $23.50, a moderate rise of around 2%, with the starting-out and training rate rising to $19.16. Around 122,500 workers were affected. Check that salaried staff still clear the new hourly floor once actual hours worked are taken into account, and remember that KiwiSaver, ACC levies, and holiday pay accruals move with the higher gross wage.

• Holidays Act replacement: The Employment Leave Bill, introduced to Parliament in March 2026, would repeal the Holidays Act 2003 and move to an hours-based accrual model for annual and sick leave from day one of employment, together with a new 12.5% Leave Compensation Payment for casual and additional hours, replacing the current 8% holiday pay approach. The Education and Workforce Committee was due to report back by 13 July 2026. If passed, a 24-month implementation period would apply, but businesses with casual or variable-hours teams - common in retail and hospitality - should start modelling the cost and payroll-system impact now.

• Immigration settings: The median wage requirement was removed from the general Accredited Employer Work Visa in March 2025; AEWV roles now only need to meet the New Zealand minimum wage and market rate for the role. The immigration median wage, which still drives Green List, partner-support, and residence thresholds, rose to $35.00 an hour from 9 March 2026, and 47 further occupations were added to the National Occupation List at skill levels 1-3, widening recruitment options in sectors including hospitality, construction, and trades.

ACTION: Build the higher minimum wage and on-costs into FY27 budgets now, start scenario-planning payroll and pricing for the proposed Leave Compensation Payment, and check whether recent National Occupation List additions open new recruitment channels for hard-to-fill roles.

INDUSTRY SPOTLIGHT - RETAIL

Retail has had a difficult start to 2026. Company liquidations in the sector rose 34% in the year to March 2026, and a cluster of well-known chains and independents closed stores in January alone, reflecting the same margin squeeze discussed in our economic update - higher input and fuel costs colliding with cautious, discretionary-conscious consumer spending.

Practical priorities for retailers:

• Cash flow and margin discipline: With consumer spending patterns still uneven, review pricing, supplier terms, and stock levels regularly rather than annually, and keep a rolling cash-flow forecast rather than relying on the prior year as a guide.

• GST and stock: Write-offs of obsolete or damaged stock, and any historic GST coding errors, are worth identifying and correcting proactively - voluntary disclosure is treated far more favourably than an Inland Revenue-initiated correction.

• Workforce costs: Retail typically has a high proportion of minimum-wage and casual staff, so the wage and leave changes summarised above will affect retail rosters and pricing more than most sectors.

• Online and in-store together: Consumer-facing technology is moving quickly, including early use of AI-based shopping tools by customers. It is worth reviewing how your online and in-store offerings work together as part of normal business planning, separate from tax and compliance considerations.

ACTION: If trading conditions are tight, engage with your bank, landlord, and Inland Revenue early - a proactive conversation and a credible plan is a far stronger position than waiting until a statutory demand arrives.

INDUSTRY SPOTLIGHT - HOSPITALITY

Hospitality recorded the highest liquidation rate of any sector in the year to March 2026 - 399 liquidations, up 49% on the prior year and around 1.3% of all hospitality businesses - as thin margins met rising rates, rent, insurance, and food costs, alongside softer discretionary spending. Inland Revenue is typically the largest creditor in these liquidations and has been actively pursuing tax debt built up since the COVID years.

Practical priorities for hospitality operators:

• Weekly, not monthly, cash flow: In a sector where margins can turn quickly, weekly cash-flow monitoring - covering GST, PAYE, and supplier payments - gives far more warning than a monthly management account.

• Stay current with Inland Revenue: PAYE and GST arrears are common features in hospitality liquidations. If a payment is going to be late, contact Inland Revenue, or ask us to, before the due date, not after.

• Casual and variable-hours workforce: Hospitality's heavy reliance on casual and part-time staff makes the proposed Employment Leave Bill changes especially relevant. The new Leave Compensation Payment and hours-based accrual model would change how rosters and payroll are costed.

• Migrant staffing: The hospitality sector's previous below-median-wage visa exemption ended in March 2025; AEWV roles must now meet the New Zealand minimum wage and market rate, which may affect the cost of recruiting migrant chefs and other specialist staff.

ACTION: Treat GST and PAYE compliance as a non-negotiable priority, and if debt is building, talk to us about a payment arrangement or restructuring options before Inland Revenue or another creditor takes enforcement action.

INDUSTRY SPOTLIGHT - PROPERTY DEVELOPMENT AND CONSTRUCTION

Property and construction settings have shifted materially over the past two years, and further change is coming as the Government replaces the Resource Management Act.

Key settings to factor into feasibility and structuring:

• Bright-line test: For residential property sold on or after 1 July 2024, the bright-line period is a standard two years, down from up to ten years previously, measured generally from the date title transfers to the date a binding sale agreement is signed. Property developers, builders, and dealers remain taxable on sale under separate land-sale rules regardless of the bright-line outcome.

• Interest deductibility restored: Interest on residential rental property borrowing has been 100% deductible again since the 2025-26 income year, beginning 1 April 2025, completing the phased restoration from the previous full denial of deductions. This materially changes the after-tax return on rental and build-to-rent holdings.

• RMA replacement under way: The Resource Management Act is being replaced by the Natural Environment Bill and the Planning Bill, expected to be enacted in 2026 with national direction released progressively from late 2026. In the meantime, a transitional consenting framework applies, and existing resource consents due to expire have been extended, generally to 31 December 2027, to provide continuity. The Government's own estimate is that up to 49% of current consent and permit requirements could be removed under the new system.

• Sector balance-sheet risk: Construction accounted for around 30% of all company liquidations in the year to March 2026, with 768 firms affected. Small subcontractors with five or fewer staff were particularly exposed - a reminder to check the financial strength of key subcontractors and suppliers on live projects.

ACTION: Model bright-line, interest deductibility, and GST treatment into project feasibility from the outset, keep a close eye on transitional RMA consenting timeframes for projects in the pipeline, and review the financial standing of key subcontractors before committing to new projects.

INDUSTRY SPOTLIGHT - MANUFACTURING AND SERVICES

Manufacturing has been a genuine bright spot this year. The BusinessNZ Performance of Manufacturing Index reached a five-year high of 59.7 in June 2026, putting New Zealand ahead of Japan, the United States, the United Kingdom, China, Australia, and the Eurozone on the equivalent global measure. That said, confidence dipped earlier in the year on global uncertainty - the Middle East conflict, tariff developments, and supply-chain and energy-cost risk - so momentum is worth watching rather than assuming.

Practical priorities for manufacturers and service businesses:

• R&D Tax Incentive: The new in-year (quarterly) RDTI payment option is particularly relevant for manufacturers running ongoing product development. It converts a year-end lump sum into working capital through the year. Businesses with material internal software development spend should also check the revised $3 million cap.

• Input costs and tariffs: Global tariff developments and input-cost volatility, particularly steel, aluminium, and fuel-linked freight costs, are worth factoring into pricing and supplier contracts, especially for exporters and businesses reliant on imported components.

• Workforce costs: The minimum wage and proposed Holidays Act changes summarised above apply equally to manufacturing and service businesses, and are worth building into standard costing and quoting processes.

• Asset investment: With order books strengthening, this is a good time to review your asset replacement and capital expenditure plans alongside depreciation and tax timing, particularly ahead of any further OCR increases that would raise the cost of debt-funded investment.

ACTION: Use the current period of manufacturing strength to reassess RDTI claims, review pricing against input-cost and tariff risk, and build a capital expenditure plan while conditions remain favourable.

INTERNATIONAL TAX AND DIGITAL NOMADS

As international travel and remote work remain common, cross-border tax issues are increasingly relevant. Individuals and businesses need to understand how residence and permanent establishment rules interact with double tax agreements, foreign tax credits, and New Zealand regimes such as FIF.

Practical considerations:

• Individuals working overseas for extended periods must track days of presence and economic ties to manage tax residence and treaty tie-breaker positions.

• Companies allowing staff to work remotely from other jurisdictions may create permanent establishments or registration obligations offshore.

• Offshore investment platforms and portfolios should be reviewed for FIF exposure and the potential benefits of the proposed higher threshold and wider RAM access.

ACTION: Obtain tailored advice before committing to extended remote work arrangements or cross-border expansion to avoid unintended residence or permanent establishment outcomes.

TRUSTS, ESTATE PLANNING AND INTER-GENERATIONAL WEALTH

Trusts continue to play an important role in asset protection and succession planning, but Inland Revenue's interest in high-wealth individuals has lifted expectations around documentation and governance. Clear, coherent structures are essential to support inter-generational wealth transfers and estate planning outcomes.

Key points:

• Trustee resolutions, distribution records, and beneficiary current accounts should be complete, timely, and consistent with the trust's stated purposes.

• Wills, enduring powers of attorney, and trust deeds should be reviewed together, particularly where family members or assets span multiple jurisdictions.

• Existing trust structures should be tested against evolving family circumstances and the broader capital gains tax debate ahead of the election.

• Trustee tax rate: Income retained in a trust, rather than distributed, is taxed at 39%, aligned with the top personal rate since 1 April 2024. A de minimis exception keeps trusts with net trustee income of $10,000 or less at 33%. Distributing income to beneficiaries on lower marginal rates remains an effective planning tool, provided distributions are genuine, properly documented, and beneficiaries can actually access the funds. Inland Revenue has flagged concerns where this is not the case.

• Annual disclosure: Most trusts deriving assessable income must file financial statements and disclose settlements, distributions, and settlor and beneficiary details with each IR6 return. Incomplete or inconsistent disclosure is a common trigger for Inland Revenue follow-up, so this is worth reviewing well before the return is due.

ACTION: Schedule periodic trust and estate planning reviews to confirm that structures remain fit for purpose and would stand up to Inland Revenue or judicial scrutiny.

ELECTION WATCH - CAPITAL GAINS TAX AND PROPERTY

With the General Election confirmed for Saturday, 7 November 2026, debate over capital gains tax remains intense. Proposals range from a targeted CGT on certain investment and commercial property to maintaining current settings but tightening integrity rules such as the bright-line test and interest limitation.

Australia's Federal Budget in May 2026 tightened its own settings materially: negative gearing will be phased out for newly acquired established residential properties from 1 July 2027, with existing holdings grandfathered, and the 50% CGT discount is being replaced with cost-base indexation and a 30% minimum tax rate. That shift has refocused attention on New Zealand's comparatively light direct taxation of capital. Even without a broad-based CGT here, the combination of bright-line tests, ring-fencing, interest limitation, and enforcement trends means property investors already face increasing scrutiny.

ACTION: Stay across party policy announcements and Inland Revenue guidance in the lead-up to the election, and ensure current transactions comply with existing bright-line, ring-fencing, and interest limitation rules.

KEY TAX DATES SNAPSHOT - JULY TO OCTOBER 2026

This is a high-level guide only. Always confirm your exact due dates in myIR.

HOW WE CAN HELP

Should you have questions about any matters covered in this newsletter, or need assistance with:

• Understanding how Budget 2026 changes affect your business or investment portfolio

• Reviewing charitable giving strategies ahead of the new donation tax credit cap

• Assessing foreign investments under the proposed FIF thresholds and RAM changes

• Managing Inland Revenue debt, audits, and payment arrangements

• Ensuring GST and PAYE compliance in light of increased enforcement

• Addressing overdrawn shareholder current accounts and the proposed integrity measures

• R&D Tax Incentive claims and the upcoming in-year payment option

• Cash-flow forecasting, business resilience planning, and interest rate exposure

• International tax issues for mobile workers and cross-border business activity

• Cash-flow, workforce cost, and resilience planning for retail, hospitality, property development, manufacturing, and service businesses

• Insolvency, restructuring, and creditor negotiation support, including proactive engagement with Inland Revenue

We are here to help you navigate the changing tax and business environment.

CONTACT GREENLANE CA LIMITED

Email: info@glca.co.nz
Phone: +64 09 522 5182
Website: www.glca.co.nz
Address: 97 Great South Road, Epsom, Auckland

DISCLAIMER

This newsletter is published by Greenlane CA Limited for informational purposes only. The content is of a general nature and does not constitute professional tax, accounting, legal, or financial advice. While every effort has been made to ensure accuracy and currency, Greenlane CA Limited makes no representations or warranties, express or implied, as to the accuracy, reliability, completeness, or currency of the information.

Readers should not act or refrain from acting based solely on the information in this newsletter without first seeking professional advice tailored to their specific circumstances. Tax laws and regulations are subject to change, and the application of these laws depends on the particular facts and circumstances of each case. Greenlane CA Limited, its directors, employees, and agents accept no responsibility or liability for any loss, damage, cost, or expense incurred by any person as a result of relying on the information contained in this newsletter, or any errors or omissions therein, howsoever caused.

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