IRD proposes changes to shareholder loan rules
On 4 December 2025, Inland Revenue released a consultation paper outlining concerns about how shareholder loans are currently being used and the potential tax advantages they can create. The paper proposes several changes to tighten the rules and improve tax integrity. Here’s a run-through of the key points being proposed.
Background
Under the current settings, shareholders who take funds out of their company as a loan often end up paying significantly less tax than if they were paid via salary or dividends. That’s because only the interest component is taxable at the company rate, while salaries and dividends are fully taxed at the shareholder’s personal marginal rate.
IRD has also highlighted that many shareholder loans linger for years without being repaid, effectively creating a long-term tax advantage. And this isn’t a niche issue, IRD’s data shows shareholders across 119,000 New Zealand companies owe around $29 billion in loans, and that number keeps climbing.
What’s Being Proposed
IRD is suggesting three key changes, all of which would apply from 4 December 2025, the day the consultation paper was released.
- Treating certain shareholder loans as dividends
- New loans over $50,000 that aren’t repaid within 12 months of balance date would be treated as dividends for tax purposes.
- The rule would apply only to new loans made after 4 December 2025, unless an existing loan is materially changed.
- Existing loan balances would still count when determining whether you’ve exceeded the $50,000 threshold.
- A de-minimis threshold is included to keep compliance manageable for smaller balances.
- Taxing outstanding loans when a company is removed from the Companies Register
Any shareholder loan outstanding when a company is removed would be treated as taxable income. This applies to all companies removed after 4 December 2025.
- Strengthened record-keeping requirements
Companies would need to maintain memorandum accounts for Available Subscribed Capital (ASC) and Available Capital Distribution Amount (ACDA) to support more accurate tax calculations during liquidation.
Why this matters
- The proposed rules apply retrospectively from 4 December 2025, closing the door on any restructuring before the changes take effect.
- If you currently have shareholder loan balances outstanding, or you’re planning additional company-to-shareholder loan transactions, please get in touch.
IRD is accepting feedback on the consultation until 5 February 2026, and we’ll continue monitoring developments.
If you’d like to discuss how the proposals may affect you, please call. We’re here to help.