Changes coming for employers

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Title: Employer Webinar

Subtitle: Changes coming in 2026

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Kia ora everyone and welcome to this webinar.

My name is Helen Mitchell and with me today is Vicki Cronin.

We are Relationship Managers at Inland Revenue.

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Nau mai, Haere mai, Welcome

Topics:

• Employee Share Scheme
• Fringe Benefit Tax
• Employment Information
• KiwiSaver

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In this webinar we’ll cover changes for employers including changes for the employee share scheme, Fringe Benefit Tax, Employment Information and KiwiSaver.

Please note: This information in this presentation is current as at 23rd of February 2026 and may be subject to change.

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Title: Employee Share Scheme

Image: Decorative photo of a person using a calculator and laptop.

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Let’s start by looking at what’s changing for the employee share scheme.

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Title: Employee Share Scheme

Subtitle: Tax deferred employee share schemes

A new deferral regime for employee share schemes is available for unlisted companies.

Employers can elect into the regime with tax on shares deferred until the earliest of these liquidity events (taxing date):

• The company lists on a stock exchange.
• Shares are sold or cancelled.

If a liquidity event occurs but a liquid asset or entitlement is not received, deferral is continued until a further liquidity event.

Generally, employee’s income is recognised 20 days after the taxing date (the “ESS deferral date”).

Employers can choose to withhold PAYE at the taxing date to make it easier for employees to meet their tax obligations.

Employees must include this income in their end-of-year tax return for the year a liquidity event occurs.

Audio

From 1 April 2026, a new tax deferral option for employee share schemes is available for unlisted companies.

Employers can elect into the deferral regime and must notify Inland Revenue and the employee when the shares are designated as employee deferred shares.

This option lets employees delay paying tax on shares or share options until the earliest of a liquidity event—when shares can be valued and sold/p>

A liquidity event happens when:

• the company lists on a stock exchange
• the shares are sold or cancelled

Previously a liquidity event also included “Payment of a dividend”. This has now been removed.

If a liquidity event occurs but no liquid asset or entitlement is received, deferral continues until a further liquidity event.

The employee’s income is calculated based on the market value of the shares at that taxing date. The income is recognised 20 days later, of the Employee Share Scheme deferral date.

Employers can choose to withhold PAYE at the taxing date to make it easier for employees to meet their obligations.

Employees must include this income in their end-of-year tax return in the year the liquidity event occurs.

The tax deferral regime is optional. Employers must notify Inland Revenue and the employee when shares are designated as employee deferred shares. The next slide covers employer obligations if you opt in.

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Title: Employee Share Scheme

Subtitle: What employers need to do

Ensure employees understand

Make it clear to employees that their shares are tax-deferred shares.

Elect into the regime with Inland Revenue within 20 days of issue

Send a secure web message via myIR with subject “Deferred employee share scheme”.

Include Employee’s name, IRD number, date of shares issued and number.

Reporting obligations

Report the ESS benefit when it arises, based on the deferred taxing date (the liquidity event).

Identify and correctly report employee deferred shares in employment income reporting (EI).

Tax withholding

Choose whether to withhold tax when the benefit arises. If you do not withhold tax, the employee will pay through their end-of-year tax return.

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Employers need to clearly communicate to employees when their shares are tax-deferred.

To use the new regime, employers need to elect into it by notifying Inland Revenue. This is done by sending a secure web message through myIR with the subject line “Deferred employee share scheme.” The message needs to include the employee’s name, IRD number, and the date the shares were issued, and the number of shares. This is to happen within 20 days of issuing the shares.

When it comes to reporting, employers need to report the Employee Share Scheme benefit when it arises—based on the deferred taxing date, which is the liquidity event. They do this by including the value in Employment income reporting, the EI. This is the same as what currently happens for a standard employee share scheme.

Finally, the employer needs to decide whether to deduct tax when the benefit arises. If they choose not to deduct tax, the employee will need to pay the tax through their end-of-year return.

These steps help ensure the process runs smoothly and everyone understands their obligations.

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Title: Employee Share Scheme

Subtitle: Clarifying timing of employer’s deductions

Employers can claim deductions for ESS-related expenses on the taxing date.

Employee income is generally recognised 20 days later.

Transitional rules will apply where a company is subject to a merger or acquisition deal that was not concluded prior to this change. This includes where the taxing date is retrospective, a deduction can occur in a prior year.

Application date is 1 April 2026.

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Employers providing employee share scheme benefits can claim a deduction for related expenses at the taxing date, even though the employee’s income is recognised 20 days later.

The amendment will set the timing for this deduction. It will happen on the share scheme taxing date. This is even though the employee’s income under the share scheme rules generally arises 20 days later on the Employee Share Scheme deferral date.

Transitional rules will apply where a company is subject to a merger or acquisition deal that’s not concluded prior to this change.

This clarification, effective from 1 April 2026, removes uncertainty and helps businesses align their tax deductions with the timing of the benefit.

Before we move on, I’ll just note that specific rules will apply where a company is subject to a merger or acquisition deal that was not concluded prior to this change including transition rules.

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Title: Fringe Benefit Tax

Image: Decorative photo of a person using a calculator and laptop.

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Up next is the upcoming changes to Fringe Benefit Tax.

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Title: Fringe Benefit Tax

Subtitle: Accounting for investment boost on motor vehicles

Where the tax book value for a motor vehicle includes a reduction for Investment Boost, the taxable benefit is to be calculated at:

Yearly

• 41.4% GST inclusive or
• 47.61% GST exclusive

Quarterly

• 10.35% GST inclusive or
• 11.90% GST exclusive.

There is also a new minimum tax book value of $7,317 for a vehicle where Investment Boost has been claimed.

Applies from 1 April 2026.

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From 1 April 2026, the value of any benefit for using a motor vehicle will be calculated based on the taxable value of the vehicle, after the Investment Boost deduction;

For Yearly calculations the rate will be 41.4% GST inclusive or 47.61% GST exclusive tax values.

For Quarterly it will be 10.35% GST inclusive or 11.90% GST exclusive.

Where there is no Investment Boost deduction continue to calculate the taxable benefit on the taxable value at the existing rates.

There is also a new minimum tax book value of $7,317 for a vehicle where Investment Boost is claimed.

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Title: Fringe Benefit Tax

Subtitle: Gift cards

Employers generally have 2 options for Gift Cards (both open & closed loop) provided to employees:

• elect to apply the FBT rules to the gift card, or
• treat the gift card as money and subject to PAYE.

Gift cards are treated as unclassified benefits for the purpose of applying FBT de minimis thresholds.

Where employers apply the FBT rules to gift cards, including where the value is below the thresholds, PAYE will not apply and vice versa when employer treats the gift card as subject to PAYE.

Applies to benefits provided on or after 16 April 2025.

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Employers now generally have a choice: they can treat gift cards (both open & closed loop) given to employees as subject to Fringe Benefit Tax or treat them as money and apply PAYE.

Gift cards are treated as unclassified benefits for the purpose of applying FBT de minimis thresholds.

If an employer applies the FBT rules including where the value is below the FBT thresholds PAYE will not apply and vice versa.

This option became available on 16 April 2025 and gives employers more flexibility in how they manage these benefits.

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Title: Fringe Benefit Tax

Subtitle: Equalisation of FBT and PAYE

There are 2 options for employers reimbursing an employee for expenditure that would be an unclassified benefit if the employer had provided it directly to an employee:

• treat the amount as employment income and deduct PAYE; or
• treat as an unclassified benefit under the FBT rules.

Where employers treat an amount as an unclassified benefit there will be no PAYE liability or vice versa.

Where an amount is accounted for as an unclassified benefit but no FBT is payable due to a de minimis then this amount would not become subject to PAYE.

Applies from 1 April 2026.

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Employers will have two options when reimbursing an employee for expenses that would otherwise be an unclassified benefit if providing directly.

They can either treat the amount as employment income and deduct PAYE or treat it as an unclassified benefit under the FBT rules.

If an amount is treated as an unclassified benefit (including where this is below the threshold), there will be no PAYE liability, and vice versa.

Where an amount is accounted for as an unclassified benefit but no FBT is payable due to a de minimis then this amount would not become subject to PAYE.

This also applies from 1 April 2026.

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Title: Fringe Benefit Tax

Subtitle: Global Insurance policies

Employers that pay a specified insurance premium or contribute to the insurance fund of a friendly society and all employees have a similar entitlement they can choose how to calculate FBT from two options:

• divide the total cost by the number of employees and attribute to each employee, or
• treat the payment as a pooled benefit and pay FBT based on the pooling rate.

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For global insurance policies, if employers pay a specified insurance premium or contribute to the insurance fund of a friendly society and all employees have a similar entitlement, they can choose how to calculate FBT from two options:

• divide the total cost by the number of employees and attribute to each employee, or
• treat the payment as a pooled benefit and pay FBT based on the pooling rate.

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Title: Fringe Benefit Tax

Subtitle: Exemption for healthy and safety clothing

• Change will exclude unbranded personal protective clothing from FBT
• This change is backdated to 1 April 2006.

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Clothing meeting the definition of personal protective equipment in the Health and Safety at Work Act 2015 would come within the health and safety exemption for FBT purposes.

This change is backdated to 1 April 2006.

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Title: Fringe Benefit Tax

Subtitle: Unclassified benefits provided to employees of associates

For employers liable for FBT on unclassified benefits and gift cards where the total value of benefits in 4 categories exceeds the threshold.

Wording clarification made to categories (c) and (d) to help ensure benefits provided are correctly calculated.

Applies from 1 April 2022 with a savings provision for returns filed under the previous wording.

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Finally, unclassified benefits provided to employees of associates. Employers will be liable for FBT where the total value of unclassified benefits and gift cards in four categories exceeds the threshold.

There’s a wording clarification for categories C and D to ensure benefits provided to employees of associates are calculated correctly. The legislative intent does not change for either category.

This change applies from 1 April 2022, with a savings provision for returns filed under the previous wording.

These changes aim to make FBT rules clearer and give employers more certainty in how benefits are treated.

I will now hand you over to Vicki.

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Title: Employment Information

Image: Decorative photo of a person using a calculator and laptop.

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Thanks Helen. There has also been a change for employment information.

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Title: Employment Information

New upfront validation to show an error when there are Child Support deductions received for employees who do not have Liable Parent accounts.

The error will prevent the customer from submitting the return until the information is corrected. This will impact returns submitted through:

• myIR file upload
• Returns API
• myIR onscreen entry

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We’ve introduced a new upfront validation for Employment Information line items.

If Child Support deductions are included for employees who don’t have a Liable Parent account, an error will show.

Employers won’t be able to submit their EI return until those errors are corrected.

This will apply whenever data is uploaded through file upload, the Returns API or myIR onscreen entry.

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Title: KiwiSaver

Image: Decorative photo of coins in a jar.

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Let’s move on to the latest changes to KiwiSaver, which affect both employers and employees.

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Title: KiwiSaver eligibility

Subtitle: Extending eligibility for employer contributions to employees aged 16-17

Employees aged 16 and17 who are enrolled in KiwiSaver will also be eligible for compulsory employer contributions.

Note: This does not change the rules for automatic enrolment.

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From 1 April 2026, employees aged 16 and 17 who are enrolled in KiwiSaver will now be eligible for compulsory employer contributions. The rules for automatic enrolment remain unchanged.

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Title: Minimum contribution rate

Subtitle: KiwiSaver employer and employee contributions increase to 3.5%

The default minimum contribution rate for both employers and employees will increase from 3% to 3.5%.

Employers are required to apply the new minimum rate from the first pay date on or after 1 April 2026, regardless of when the work was performed.

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From 1 April 2026, the minimum KiwiSaver contribution rate for both employers and employees will increase from 3% to 3.5%.

Employers must apply this rate from the first pay date on or after 1 April 2026. This applies regardless of when the work was performed - if the payment is made on or after that date, the new rate must be used.

This change supports stronger retirement savings for members.

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Title: Reduced minimum contribution rate

Subtitle: Applicable to member deductions

From 1 February 2026, members can apply for a temporary rate reduction from 3.5% to 3% through myIR, phone, or web message.

Applications for reduced rates received between 1 February and 31 March 2026 will take effect from 1 April 2026.

To qualify for a rate reduction, the member must not have an active savings suspension.

The reduction can be approved for a minimum of 3 months to a maximum of 12 months. Members must reapply to extend it.

Notifications will be sent before the rate reduction expires.

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Members can apply for a temporary reduction in their KiwiSaver contribution rate from 3.5% to 3%, applications opened on the 1st of February 2026.

Applications can be made through myIR, by phone, or by web message.

Applications received before the 31st of March will take effect from 1 April.

To qualify, members must not have an active savings suspension.

The reduction can last anywhere from 3 months to 12 months, and members will need to reapply if they want to extend it.

Members will receive a notification 30 days before the rate reduction expires. Employers will be notified 7 days before the member’s rate reduction expires.

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Title: Reduced minimum contribution rate

Subtitle: Applicable to employer contributions

The rate reduction also applies to employer contributions, allowing them to temporarily contribute at 3%.

Members can ask Inland Revenue to notify their employer of the change – a confirmation letter will be sent once the application is processed.

To cancel the reduction, members must tell their employer to resume standard deductions by completing a KS2 form. If they want to use the reduced rate again with the same employer, they’ll need to reapply.

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The rate reduction also applies to employer contributions so if a member’s contribution rate is reduced, their employer can also temporarily reduce their contributions to 3% for the same period.

Members can ask Inland Revenue to notify their employer, and they’ll receive a confirmation letter once the application is processed.

If they want to cancel the reduction, members need to tell their employer to resume standard deductions by completing a KS2 form. If they want to use the reduced rate again with the same employer, they’ll need to reapply.

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Title: Future changes

Subtitle: From 1 April 2028

The minimum contribution rate will increase again, from 3.5% to 4% for both employers and employees.

Employees can apply for a contribution rate reduction if they are unable to afford the minimum rate.

If an employee has a reduced contribution rate, the reduced rate can also apply to the employer contributions.

The rate increase applies from the first pay date after 1 April 2028.

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Looking ahead to 1 April 2028, the minimum KiwiSaver contribution rate will rise to 4% for both employers and employees. Employees who need flexibility can still apply for a reduced rate, which will also apply to employer contributions.

These changes aim to strengthen KiwiSaver while supporting members’ ability to manage their contributions.

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Inland Revenue
Te Tari Taake

Ngā mihi maioha

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That brings us to the end of our employer webinar.

If you want to find out more about the other webinars available for April Release 2026, go to www.ird.govt.nz/aprilrelease

Thank you for watching.