Global Daily Tax News, New Zealand Proposes Tax Rule Changes For Shareholder Loans, (Dec 5, 2025)

New Zealand's Inland Revenue Department has launched a consultation on proposals to introduce stricter tax rules for new loans by companies to shareholders.

The changes are intended to align New Zealand's rules with those of other similar countries, the tax agency said.

David Carrigan, Deputy Commissioner for Policy, said: "We recognise that most companies manage their loans to shareholders and drawings responsibly. However, the current rules can allow some loans to become unmanageable, to the point they may never be repaid. For instance, our data has revealed some very large outstanding loans from companies to their shareholders. For the 2024 tax year, IR data shows about 5,550 companies had outstanding loan balances of more than NZD1m each."

"When a shareholder borrows a large amount from their company and doesn't pay it back, our current rules mean they can pay less tax compared to other shareholders who receive taxable dividends or taxpayers who earn income through salary or wages," Carrigan said. "The current rules also often fail to collect tax on the funds left in the hands of the shareholder when a company is wound up."

Under the proposal, a new time limit rule would treat certain shareholder loans as dividends if they aren't repaid within 12 months from the end of the income year they were made.

The change will only apply to new loans made after December 4, 2025, and the proposed time limit would only apply to companies whose total lending to shareholders is NZD50,000 or more.

In addition, the consultation discusses proposals for outstanding loans to be taxed when a company is removed from the Companies Register and for improved reporting obligations on companies.

"Ministers have not made any decisions on these proposals. This consultation and the feedback people give will help us to ensure that the advice we give to Ministers is balanced and practical," Carrigan said.

Feedback is being sought by February 5, 2026.