11 March 2026, 3 pm – NZ First and ACT appear to be threatening to sink a tax measure that would close a major tax loophole and raise important revenue for the government. Tax Justice Aotearoa and the Better Taxes Coalition say this is a concerning development.
It was reported in the NZ Herald today that the coalition parties are likely to oppose the proposal currently being considered by the Government for company loans to be treated as taxable income in circumstances where the shareholder would otherwise gain a tax advantage compared with recipients of dividends or salaries.
“This is a significant loophole – it creates unfairness and deprives the government of much needed revenue – and it looked like the Government was going to move to close it,” said Glenn Barclay, spokesperson of Tax Justice Aotearoa and the Better Taxes Coalition.
“It is concerning that NZ First and ACT, might not support a measure that both Australia and the UK have and which will address what appears to be a very significant distortion in the tax system. Shareholders owe around $29b to companies at the moment – that is a substantial amount and it needs to be taxed appropriately,” said Barclay.
Tax Justice Aotearoa submitted to the IRD consultation on the proposal and argued the UK legislation was the best model for Aotearoa New Zealand to follow. There the tax charge is linked to the loan and is repayable if the loan is repaid, providing an incentive to do so and ensuring that legitimate loans will not be taxed.
“The UK model is well established and a workable approach that would not result in excessive taxation,” said Glenn Barclay. “But would remove the current distortion and gather revenue that’s currently being lost to this loophole.”
Tax Justice Aotearoa noted the 2017-18 Tax Working Group recommended that closely held companies should provide security to IRD if the company was owed a debt by a shareholder and there was doubt about the ability and/or the intention of the shareholder to repay the debt and therefore should have been taxed as if the loan was a dividend or salary.
“The rhetoric around this has been intentionally overblown”, said Glenn Barclay. “With the right design, taxing shareholder loans would be a practical response to a real problem of unfairness and lost revenue – it would not be ‘draconian’ or ‘double taxation’. We call on all the parties in the Coalition Government to take a constructive approach to address this major loophole in our tax system”.
