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Inland Revenue

Tax Policy

Last updated 9 May 2022
Closing date 29 April 2022

Status Complete

Dividend integrity and personal services income attribution

The Government recently introduced and implemented a new top personal income tax rate of 39% for income earned over $180,000. Tax rates on other types of taxpayers, including companies and trusts, remained unchanged at 28% and 33% respectively.

The Government is seeking feedback on measures that would limit the ability of individuals to avoid the 39% personal income tax rate (or the second-highest personal income tax rate of 33%) by diverting their income through entities taxed at a lower rate.

It is proposing that:

  • Any sale of shares in a company by the controlling shareholder be treated as giving rise to a dividend to the shareholder to the extent that the company (and its subsidiaries) has undistributed earnings other than from capital gains.
  • Companies be required, on a prospective basis, to maintain a record of their available subscribed capital and net capital gains, so that these amounts can be more easily and accurately calculated at the time of any share cancellation or liquidation.
  • The “80 percent one buyer” test for the personal services attribution rule be removed.

Full details of the proposals and information on how to make a submission are available in the consultation document Dividend integrity and personal services income attribution.

Submissions closed on 29 April 2022.