Changes to financial arrangements rules to support migrants 

Why is this change needed?

• Financial arrangement:

  • Arrangement where a person provides another with money now, on the expectation of repayment in the future

  • Tax rules govern how income from financial arrangements are calculated for tax purposes

• The rules are complicated

• The rules were designed to recognise income and expenses from arrangement on an accrual basis, which doesn’t always align with actual cashflow impacts. 

• Financial arrangements denominated in a foreign currency which are changed are through exchange rates are still captured by the rules. 

• Taxpayers don’t know how their end-of-year tax bill will look like because of exchange rate fluctuations.

• Migrants hold much more foreign currency arrangements, and experience more uncertainty in investments. 

What are the proposed changes?

• The following changes from the government targets reducing the impact of exchange rate fluctuations. 

  • “New rules that would allow some taxpayers to reduce their exposure to unrealised exchange rate gains and losses by calculating income under some of the financial arrangements rules in a foreign currency (instead of New Zealand dollars)”

  • “Special rules to protect certain individuals who are exposed to cross-border double taxation because of the accrual basis of the financial arrangements rules.”

  • “A new calculation method for arrangements acquired for the purpose of meeting the Active Investor Plus visa requirements that would prevent surprise tax obligations from the data a person arrives in New Zealand.”

  • “Changes to remove low risk, common foreign currency arrangements from the financial arrangements rules altogether, such as personal bank accounts, mortgages on private homes, and credit cards with foreign banks.”

• Changes will apply from 1 April 2027

• Relevant changes to Active Investor Plus visa will be backdates to 1 April 2025

Who would benefit from these changes?