Budget 2026 contained a set of targeted tax changes rather than a headline rate move. Several of them matter considerably more to small and medium businesses than the coverage suggested.
Shareholder loans after a company is wound up
New rules will apply six months after a company has been liquidated or otherwise removed from the Companies Register, treating any outstanding loans the company previously made to its shareholders as income.
Inland Revenue expects this to generate around $146 million over the forecast period, which tells you how common the arrangement is.
The practical target is clear: shareholders who draw money from a company as a loan rather than salary or dividend, and then wind the company up without ever repaying it. That has been an effective way of extracting value without the tax that would apply to a distribution.
What to do about it. If you have a shareholder current account overdrawn — meaning you owe the company money — this is the moment to deal with it deliberately rather than at wind-up. Options include repaying it, declaring a dividend to clear it, or taking it as salary, each with different consequences.
A surprising number of small company owners cannot say whether their current account is overdrawn. It appears on the balance sheet and is worth asking your accountant about directly.
R&D tax credits paid in-year
The Budget introduces in-year payments for R&D tax credits, which is a cashflow change rather than a rate change and a meaningful one.
Under the existing arrangement, a business incurs R&D expenditure through the year and receives the credit after filing. For a company burning cash on development, that gap is funded from working capital.
Eligibility has also been expanded to include expenditure incurred in the mining industry.
The incentive remains a credit equal to 15 percent of eligible R&D expenditure, with a $50,000 minimum spend that is waived where expenditure is with an approved research provider. The eligibility test is whether the activity seeks to resolve scientific or technological uncertainty — which software development, process improvement and engineering design routinely do.
Non-resident contractors
A proposed single-payer approach to non-resident contractor tax would mean a New Zealand business only needs to consider its own contract with the non-resident contractor, rather than assessing the contractor’s wider New Zealand activity.
That is a genuine compliance reduction. Under the current approach, working out your withholding obligation can require knowing what a contractor is doing for other people, which you have no reliable way of establishing.
For any business engaging offshore contractors — software development, design, specialist consulting — this reduces both the administrative burden and the risk of getting withholding wrong.
More enforcement funding
Budget 2026 increased Inland Revenue’s funding for tax compliance and collection activity by a further $15 million per annum.
Additional enforcement funding has a predictable effect: more audit activity, and more attention to the areas where non-compliance is known to concentrate. For most businesses the relevant areas are the familiar ones — GST claims without supporting documentation, private use of business assets, contractor classification, and shareholder current accounts.
The practical response is not alarm but tidiness. Keep the supplier documentation for everything you claim, apportion private use honestly, and make sure your contractor arrangements would survive examination of what actually happens rather than what the agreement says.
Commissioner discretion on late filings
The Commissioner gains discretion to accept late filings and amend errors, which reduces compliance risk around technical deadlines.
This is a useful softening. Under a strict regime, a genuine administrative slip could produce a disproportionate consequence. It does not make deadlines optional — the discretion is the Commissioner’s, not yours — but it reduces the cliff-edge quality of some obligations.
Thin capitalisation for foreign-owned banks
Thin capitalisation settings will be modified for foreign-owned New Zealand banking groups to align with prudential requirements, expected to generate $45.2 million over the forecast period.
Relevant to a narrow set of taxpayers, and worth knowing about if you are assessing bank pricing, since regulatory capital changes flow into what lending costs.
What to do now
- Ask your accountant about your shareholder current account position specifically.
- If you do anything that might be eligible R&D, get the General Approval process started — deadlines run from balance date, not from filing.
- Review contractor arrangements against the substance test rather than the label.
- Make sure GST claims are supported by documentation you could produce on request.
Inland Revenue publishes tax policy material at taxpolicy.ird.govt.nz, and its guidance at ird.govt.nz, both free. Crown text may be reproduced with attribution.
Measures described are from Budget 2026 announcements. Some remain subject to legislation — confirm the current position with Inland Revenue or your accountant before acting. General information only, not tax advice.
