Taxation (Budget Measures) Bill (No 3)

Taxation (Budget Measures) Bill (No 3) EXPLANATORY NOTE GENERAL POLICY STATEMENT The tax measures in this Bill were announced as part of Budget 2026. The Bill introduces a maximum threshold of $100,000 of gifts qualifying for the donation tax credit. An income tax exemption that ensures non-resident contractors’ tax is no longer payable on the dry leasing of aircraft and aircraft parts is also introduced. The Bill also contains changes that tax a shareholder on an outstanding loan with a company six months after the company is removed from the register of companies. In addition, the Bill gives effect to several simplification changes to the Working for Families scheme, including removing low-risk adjustments from the calculation of family scheme income, increasing the other payments adjustment de minimis to $8,000, and allowing certain family scheme income adjustments to be applied by Order in Council. It also simplifies the residence requirements by requiring both the principal caregiver and a dependent child to ordinarily reside and be physically present in New Zealand and providing for a six-week overseas travel exemption before eligibility ceases, as well as exemptions for longer periods of absence for specified reasons. The Bill gives effect to these changes by amending the following Acts: Income Tax Act 2007; and Student Loan Scheme Act 2011; and Tax Administration Act 1994. The following is a summary of the specific policy measures contained in this Bill. A comprehensive explanation of all the policy items is provided in a commentary on the Bill that is available at https://www.taxpolicy.ird.govt.nz/publications/2026/commentary-taxation-budget-measures-bill-no-3 . This Bill introduces a maximum threshold of $100,000 of gifts qualifying for the donation tax credit (resulting in a maximum annual tax credit of $33,333.33). Current settings allow donation tax credits at a rate of 33⅓% of qualifying gifts made, with the total amount of gifts limited to the taxpayer’s taxable income. This change continues to support charitable giving across a broad donor base while managing the Government’s expenditure on the donation tax credit. This change applies to gifts of money made on or after 1 April 2027. Non-resident contractors’ tax is generally payable on short-term operating leases of aircraft and aircraft parts from non-residents. However, in many cases, the non-resident contractors’ tax currently charged on aircraft leasing is much greater than the potential tax liability of the non-resident lessor, and this is typically passed on as an additional cost to the New Zealand lessee. In the context of a constrained global market for aircraft and aircraft parts, this presents a barrier to the leasing of these capital assets by New Zealand businesses. This Bill ensures non-resident contractors’ tax is no longer payable in relation to dry leases of aircraft or aircraft parts by excluding them from the scope of the tax and introducing an exemption from income tax for amounts derived by non-residents from such leases. This change applies from 1 April 2026. This Bill also introduces changes to tax a shareholder on an outstanding loan six months after the lending company is removed from the register of companies. This strengthens existing rules that tax loans when they are forgiven by providing a clear and certain timing rule that will support tax compliance and improve Inland Revenue’s ability to collect tax. These changes will apply for companies removed from the register of companies on or after 4 December 2025 (the release date of the consultation paper that proposed the changes). This Bill gives effect to several simplification changes to the Working for Families scheme as follows: removing low-risk adjustments from the calculation of family scheme income; and increasing the de minimis for the other payments adjustment to family scheme income to $8,000; and introducing an empowering provision for certain family scheme income adjustments to be applied by Order in Council; and simplifying the residence requirements by requiring both the principal caregiver and a dependent child to ordinarily reside and be physically present in New Zealand; and providing a six-week overseas travel exemption before eligibility ceases, as well as exemptions for longer periods of absence for specified reasons. Changes to these settings will reduce both complexity for customers when applying for Working for Families and potential future debt. These changes will apply from 1 April 2027. DEPARTMENTAL DISCLOSURE STATEMENT The Inland Revenue Department is required to prepare a disclosure statement to assist with the scrutiny of this Bill. The disclosure statement provides access to information about the policy development of the Bill and identifies any significant or unusual legislative features of the Bill. A copy of the statement can be found at http://legislation.govt.nz/disclosure.aspx?type=bill&subtype=government&year=2026&no=320 REGULATORY IMPACT STATEMENT The Inland Revenue Department produced regulatory impact statements on 12 May 2026, 13 May 2026, and 14 May 2026 to help inform the main policy decisions taken by the Government relating to the contents of this Bill. Copies of these regulatory impact statements can be found at— https://www.taxpolicy.ird.govt.nz/publications/2026/ria-taxation-budget-measures-bill-no-3 https://www.regulation.govt.nz/our-work/regulatory-impact-statements/ CLAUSE BY CLAUSE ANALYSIS Clause 1 is the Title clause. Clause 2 gives the dates on which the clauses of the Bill come into force. AMENDMENTS TO INCOME TAX ACT 2007 Clause 3 provides that Part 1 amends the Income Tax Act 2007. Clause 4 inserts new section CW 56B , which provides that income derived by a non-resident from providing the use of, or right to use, an aircraft or aircraft parts in New Zealand under a dry lease is exempt income. Clause 5 amends section EW 29 to ensure that if a company is removed from the register of companies, a person who is a shareholder or director of that company, or a close relative of such a shareholder or director, and who has a financial arrangement with that company at the time it is removed from the register is treated as being discharged from making all remaining payments under that financial arrangement on the date that is six months after the company is removed from the register. A base price adjustment under the financial arrangements rules will therefore be triggered for that financial arrangement on that date. Clause 6 amends section LD 1 to provide that the maximum amount of gifts of money for a tax year for which a donation tax credit may be claimed is the lesser of $100,000 and the person’s taxable income for that tax year. Clause 7 makes a consequential amendment to section MA 8 to remove the now redundant definition of New Zealand resident . Clause 8 amends section MB 1 to modify certain adjustments for the calculation of family scheme income in subpart MB. Subclause (1) removes overseas pensions and certain amounts of salary or wages paid under international agreements that are exempt from tax so they are no longer included in family scheme income. Subclause (2) repeals section MB 1(5B) to (5E). The repeal of subsection (5B) removes the retirement scheme contribution exclusion from family scheme income. The repeal of subsection (5C) removes the now redundant exclusion from family scheme income of certain historical depreciation losses. The repeal of subsections (5D) and (5E) ensures that deposits to the main income equalisation account are no longer included in family scheme income at the time of the deposit and excluded at the time of their refund. Subclause (3) amends the list of defined terms. Clause 9 makes consequential amendments to section MB 4 to remove the adjustments for deposits and refunds from main income equalisation accounts as they apply to the calculation of family scheme income for major shareholders in close companies. Clause 10 repeals section MB 5 to remove the adjustment for distributions from superannuation schemes from the calculation of family scheme income. Clause 11 repeals section MB 6 to remove the adjustments for distributions from retirement savings schemes from the calculation of family scheme income. Clause 12 makes consequential amendments to section MB 7 to remove the adjustments for deposits and refunds from main income equalisation accounts as they apply to the calculation of family scheme income for settlors of trusts. Clause 13 amends section MB 7B to ensure the adjustments for employee benefits contained in that section are only included in the calculation of family scheme income if an Order in Council specifies the section applies for an income year. Clause 14 repeals section MB 10 to remove the adjustments for certain pensions and annuities from inclusion in a person’s family scheme income. Clause 15 amends section MB 12B to ensure the adjustments for certain trust payments contained in that section are only included in the calculation of family scheme income if an Order in Council specifies the section applies for an income year. Clause 16 amends section MB 13 by increasing the de minimis threshold for other payments from $5,000 to $8,000. Clause 17 replaces section MC 5 to change the tax residency requirements for entitlements under the family scheme to a test that focuses on the person’s presence in New Zealand. Clause 18 inserts new sections MC 5B and MC 5C . These sections modify the new presence requirements under replaced section MC 5 to provide some flexibility for periods of temporary absence and absences as a result of particular circumstances. Clause 19 replaces section MD 7 to change the tax residency requirements for the in-work tax credit to a test that focuses on the person’s presence in New Zealand. Clause 20 inserts new sections MD 7B and MD 7C . These sections modify the new presence requirements under replaced section MD 7 to provide some flexibility for periods of temporary absence and absences as a result of particular circumstances. Clause 21 inserts two transitional provisions, new sections MZ 4 and MZ 5 . New section MZ 4 ensures an amount of a main deposit to a main income equalisation account is not included in a person’s family scheme income twice if it is refunded in the 2027–28 or a later income year. New section MZ 5 provides for the situation when a person or child is absent from New Zealand on 1 April 2027. Clause 22 amends section YA 1. Subclause (2) amends the definition of contract activity or service to exclude providing the use of, or right to use, an aircraft or aircraft parts under a dry lease. Subclause (3) inserts a new definition of crisis event for the purposes of new sections MC 5B and MD 7B . Subclause (4) inserts a new definition of dry lease . Subclause (5) makes a consequential amendment to the definition of family member to confine its application to section CW 31. Subclause (6) makes a consequential amendment to the definition of New Zealand resident to remove the reference to repealed section MA 8. Subclause (7) inserts a new definition of removed company for the purposes of section EW 29. Clause 23 repeals Schedule 38 as a consequence of the amendment to section MB 1 in clause 8(1) of this Bill to remove the adjustment to family scheme income for amounts of salary or wages exempt under other Acts listed in that schedule. The schedule is no longer relevant to the Income Tax Act 2007, so its contents have been relocated to the Student Loan Scheme Act 2011 under clause 27 of this Bill. Clause 24 sets out the clauses that amend the Student Loan Scheme Act 2011. Clause 25 replaces the cross-heading above section 215 to refer to secondary legislation as a consequence of the relocation of the empowering provision in new section 215A . Clause 26 inserts new section 215A to relocate the empowering provision from section 225C of the Tax Administration Act 1994 to the Student Loan Scheme Act 2011. Clause 27 makes consequential amendments to Schedule 3, clause 5 to relocate the contents of Schedule 38 of the Income Tax Act 2007 to the Student Loan Scheme Act 2011 because the list of Acts contained in that schedule is now only relevant to the Student Loan Scheme Act 2011 as a result of the amendments to section MB 1 of the Income Tax Act 2007 in clause 8(1) of this Bill. Clause 28 repeals section 225C of the Tax Administration Act 1994 as a consequence of its relocation to the Student Loan Scheme Act 2011 as new section 215A of that Act under clause 26 of this Bill. The Parliament of New Zealand enacts as follows: 1 Title This Act is the Taxation (Budget Measures) Act (No 3) 2026 . 2 Commencement This Act comes into force on 1 April 2027. However,— a sections 5 and 22(7) come into force on the day after Royal assent; and b sections 4 and 22(2) and (4) come into force on 1 April 2026. 3 Amendments to Income Tax Act 2007 This Part amends the Income Tax Act 2007. 4 New section CW 56B inserted (Non-residents providing use of aircraft in New Zealand) After section CW 56, insert: CW 56B Non-residents providing use of aircraft in New Zealand An amount of income derived by a non-resident from providing the use of, or right to use, in New Zealand, an aircraft or parts of an aircraft under a dry lease is exempt income. amount, dry lease, exempt income, income, New Zealand, non-resident 5 Section EW 29 amended (When calculation of base price adjustment required) After section EW 29(9), insert: Treated as discharged if company removed from register 9B For the purposes of this subpart, a person who is a party to a financial arrangement with a removed company at the time the company is removed from the register of companies (the removal date ) is treated as having been discharged from making all remaining payments under the arrangement without fully adequate consideration on the date that is 6 months after the removal date if, on the removal date, the person is— a a shareholder or director of the company; or b an associated person under section YB 4 (Two relatives) of a person referred to in paragraph (a) . Meaning of removed company 9C For the purposes of this section, a removed company is a company that is removed from the register of companies under section 317 of the Companies Act 1993, other than for the ground specified in section 318(1)(a) of that Act. In section EW 29, list of defined terms, insert company , director , removed company , and shareholder . Subsection (1) applies in relation to a company removed from the register of companies on or after 4 December 2025. 6 Section LD 1 amended (Tax credits for charitable or other public benefit gifts) In section LD 1(3), after limited to , insert the lesser of $100,000 and . Subsection (1) applies to charitable or other public benefit gifts made on or after 1 April 2027. 7 Section MA 8 amended (Some definitions for family scheme) In section MA 8, repeal the definition of New Zealand resident . 8 Section MB 1 amended (Adjustments for calculation of family scheme income) Replace section MB 1(2), other than the heading, with: 2 For the purposes of subsection (1), an amount derived by the person in the income year is not treated as exempt income if it is an amount referred to in section CW 32 (Maintenance payments). Repeal section MB 1(5B), (5C), (5D), and (5E). In section MB 1, list of defined terms, delete business , Commissioner , depreciation loss , excluded income , income from employment , income tax , main income equalisation account , main income equalisation deposit , main income equalisation refund , qualifying company , retirement scheme contribution , salary or wages , shareholder , tax loss , and tax year . Subsections (1) to (3) apply for the 2027–28 and later income years. 9 Section MB 4 amended (Family scheme income of major shareholders in close companies) In section MB 4(2)(b), delete , adjusted, if applicable, by subsections (7) and (8) for main income equalisation account amounts . Repeal section MB 4(7) and (8). In section MB 4, list of defined terms, delete main income equalisation account , main income equalisation deposit , main income equalisation refund , and share . Subsections (1) to (3) apply for the 2027–28 and later income years. 10 Section MB 5 repealed (Treatment of distributions from superannuation schemes) Repeal section MB 5. Subsection (1) applies for the 2027–28 and later income years. 11 Section MB 6 repealed (Treatment of distributions from retirement savings schemes) Repeal section MB 6. Subsection (1) applies for the 2027–28 and later income years. 12 Section MB 7 amended (Family scheme income of settlor of trust) In section MB 7(2B), delete , adjusted, if applicable, by subsections (7) and (8) for main income equalisation account amounts . Repeal section MB 7(7) and (8). In section MB 7, list of defined terms, delete main income equalisation account , main income equalisation deposit , and main income equalisation refund . Subsections (1) to (3) apply for the 2027–28 and later income years. 13 Section MB 7B amended (Family scheme income from employment benefits: employees not controlling shareholders) In section MB 7B(1),— a replace This section applies with If an Order in Council under subsection (4) specifies that this section applies for an income year, this section applies ; and b replace for an income year when with for the income year when . After section MB 7B(3), insert: Order in Council 4 The Governor-General may, by Order in Council made on the recommendation of the Minister of Revenue, specify that this section applies for an income year. Timing of Order in Council 5 An Order in Council under subsection (4) must be published under the Legislation Act 2019 no later than 1 December in each year and must apply for the income year commencing on the following 1 April. Secondary legislation 6 An Order in Council under subsection (4) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements). Subsections (1) and (2) apply for the 2027–28 and later income years. 14 Section MB 10 repealed (Family scheme income from certain pensions and annuities) Repeal section MB 10. Subsection (1) applies for the 2027–28 and later income years. 15 Section MB 12B amended (Family scheme income from trusts, not being beneficiary income, and where recipient not settlor) In section MB 12B(1),— a replace This section applies with If an Order in Council under subsection (4) specifies that this section applies for an income year, this section applies ; and b replace for an income year when with for the income year when . After section MB 12B(3), insert: Order in Council 4 The Governor-General may, by Order in Council made on the recommendation of the Minister of Revenue, specify that this section applies for an income year. Timing of Order in Council 5 An Order in Council under subsection (4) must be published under the Legislation Act 2019 no later than 1 December in each year and must apply for the income year commencing on the following 1 April. Secondary legislation 6 An Order in Council under subsection (4) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements). Subsections (1) and (2) apply for the 2027–28 and later income years. 16 Section MB 13 amended (Family scheme income from other payments) In section MB 13(3), replace $5,000 with $8,000 . Subsection (1) applies for the 2027–28 and later income years. 17 Section MC 5 replaced (Third requirement: residence or entitlement to emergency benefit) Replace section MC 5 with: MC 5 Third requirement: presence or entitlement to emergency benefit Third requirement 1 The third requirement is that— a the person referred to in section MC 2 is entitled to receive an emergency benefit under section 63 or 64 of the Social Security Act 2018; or b all of the following are met: i the person referred to in section MC 2 meets the person’s presence requirements in subsection (2) : ii the child referred to in section MC 4 meets the child’s presence requirements in subsection (3) : iii either the person or the child or both meet the lawful presence requirement in subsection (4) . Presence requirements for person 2 The person meets the person’s presence requirements if the person— a ordinarily resides in New Zealand; and b is not a transitional resident or the spouse, civil union partner, or de facto partner of a transitional resident; and c is present in New Zealand on the days for which the person has a tax credit under any of sections MD 1 (Abating WFF tax credit), ME 1 (Minimum family tax credit), and MG 1 (Best Start tax credit entitlement); and d either— i has been present in New Zealand at any time for a continuous period of 12 months; or ii is recognised as a refugee, within the meaning of section 126 of the Immigration Act 2009, who has been brought to New Zealand. Presence requirements for child 3 The child meets the child’s presence requirements if the child— a ordinarily resides in New Zealand; and b is present in New Zealand for the entitlement period. Lawful presence under Immigration Act 4 Either the person or the child or both must be lawfully present in New Zealand under the Immigration Act 2009 other than under a temporary entry class visa. Presence for part days 5 For the purposes of this section, being present in New Zealand for part of a day is treated as being present in New Zealand for the whole day and not absent for any part of the day. Relationship with subject matter 6 This section is modified by sections MC 5B and MC 5C . child, civil union partner, de facto partner, entitlement period, New Zealand, spouse, tax credit, transitional resident 18 New sections MC 5B and MC 5C inserted After section MC 5, insert: MC 5B Modification of presence requirements for temporary absences What this section does 1 This section modifies the presence requirements in section MC 5 for the purpose of applying those requirements to a person or a child when the person or child is absent from New Zealand on a temporary basis. Periods of 42 days or less 2 If the person or child is absent from New Zealand for a continuous period of 42 days or less, they are treated as being present in New Zealand on all the days in that period. Periods of more than 42 days 3 If the person or child is absent from New Zealand for a continuous period of more than 42 days, they are treated as being present in New Zealand only on the first 42 days of that period. When subsection (5) applies 4 Subsection (5) applies if the person or child— a is absent from New Zealand for a continuous period of more than 42 days; and b returns to New Zealand; and c is absent from New Zealand for a subsequent period within 42 days of their return. Trips within 42 days of each other 5 Despite subsections (2) and (3) , the person or child is not treated as being present in New Zealand on any day in the subsequent period referred to in subsection (4)(c) . Return travel delayed or prevented 6 If the intended return to New Zealand of a person or a child is delayed or prevented because of the occurrence of a natural disaster, either in New Zealand or outside New Zealand, or a crisis event, the person or child is treated as being present in New Zealand for the period starting on the day of their intended return and ending on the first day they could reasonably practicably return to New Zealand. Meaning of crisis event 7 For the purposes of this section and section MD 7B (Modification of presence requirements for temporary absences), a crisis event — a means an unexpected global or regional event; and b includes an act of war, terrorist activity, political or social unrest, pandemic, or industrial action; and c is not unexpected if,— i while the person or child was present in New Zealand, the New Zealand Ministry of Foreign Affairs and Trade had published a warning not to travel to a country affected by the event; and ii the person or child travelled to that country regardless of the warning. Notification and evidence 8 A person who has a tax credit arising under any of sections MD 1 (Abating WFF tax credit), ME 1 (Minimum family tax credit), and MG 1 (Best Start tax credit entitlement) must— a notify the Commissioner if subsection (6) applies; and b provide evidence satisfactory to the Commissioner— i of the day of their intended return that was delayed or prevented and the reason for that delay or prevention; and ii that a specified day is the first day they could reasonably practicably return to New Zealand. Presence for part days 9 For the purposes of this section, being present in New Zealand for part of a day is treated as being present in New Zealand for the whole day and not absent for any part of the day. Relationship with section MC 5C 10 Section MC 5C overrides this section. child, Commissioner, crisis event, New Zealand, notify, tax credit MC 5C Modification of presence requirements for certain types of absences What this section does 1 This section modifies the presence requirements in section MC 5 for the purpose of applying those requirements to a person or a child when the person or child is absent from New Zealand for a continuous period of more than 42 days. Absence for schooling 2 A child who is absent from New Zealand is treated as being present in New Zealand for the period of their absence if the absence is to attend— a primary or secondary schooling outside New Zealand: b a sporting or cultural tour or event outside New Zealand. Absence for Government service 3 A person, and any child who accompanies that person, who is absent from New Zealand is treated as being present in New Zealand for the period of their absence if the person is absent— a in the service, in any capacity, of the New Zealand Government; or b because they are accompanying their spouse, civil union partner, or de facto partner who is in the service, in any capacity, of the New Zealand Government. Absence for other events 4 A person or child who is absent from New Zealand is treated as being present in New Zealand for that part of the period of their absence that is the result of any of the following: a the death, serious illness, or serious injury of the person, child, or a family member of either the person or the child: b the person, child, or a family member of either the person or the child is seeking medical treatment not available in New Zealand: c the person, child, or a family member of either the person or the child is subject to, or been called as a witness to, criminal proceedings outside New Zealand. Notification and evidence 5 A person who has a tax credit arising under any of sections MD 1 (Abating WFF tax credit), ME 1 (Minimum family tax credit), and MG 1 (Best Start tax credit entitlement) must— a notify the Commissioner if any of the circumstances set out in subsections (2) to (4) apply to the person or the child; and b provide evidence satisfactory to the Commissioner of the circumstances. Relationship with section MC 5B 6 This section overrides section MC 5B . child, civil union partner, Commissioner, de facto partner, New Zealand, notify, spouse, tax credit 19 Section MD 7 replaced (Third requirement: residence) Replace section MD 7 with: MD 7 Third requirement: presence Third requirement 1 The third requirement for an entitlement to an in-work tax credit is that— a the person referred to in section MD 4 meets the person’s presence requirements in subsection (2) ; and b the child referred to in section MD 4 meets the child’s presence requirements in subsection (3) ; and c either the person or the child or both meet the lawful presence requirement in subsection (4) . Presence requirements for person 2 The person meets the person’s presence requirements if the person— a ordinarily resides in New Zealand; and b is not a transitional resident or the spouse, civil union partner, or de facto partner of a transitional resident; and c is present in New Zealand on the days for which the person has a tax credit under section MD 1; and d either— i has been present in New Zealand at any time for a continuous period of 12 months; or ii is recognised as a refugee, within the meaning of section 126 of the Immigration Act 2009, who has been brought to New Zealand. Presence requirements for child 3 The child meets the child’s presence requirements if the child— a ordinarily resides in New Zealand; and b is present in New Zealand for the entitlement period. Lawful presence under Immigration Act 4 Either the person or the child or both must be lawfully present in New Zealand under the Immigration Act 2009 other than under a temporary entry class visa. Presence for part days 5 For the purposes of this section, being present in New Zealand for part of a day is treated as being present in New Zealand for the whole day and not absent for any part of the day. Relationship with subject matter 6 This section is modified by sections MD 7B and MD 7C . child, civil union partner, de facto partner, entitlement period, in-work tax credit, New Zealand, spouse, tax credit, transitional resident Subsection (1) applies for the 2027–28 and later income years. 20 New sections MD 7B and MD 7C inserted After section MD 7 , insert: MD 7B Modification of presence requirements for temporary absences When this section applies 1 This section modifies the presence requirements in section MD 7 for the purpose of applying those requirements to a person or a child when the person or child is absent from New Zealand on a temporary basis. Periods of 42 days or less 2 If the person or child is absent from New Zealand for a continuous period of 42 days or less, they are treated as being present in New Zealand on all the days in that period. Periods of more than 42 days 3 If the person or child is absent from New Zealand for a continuous period of more than 42 days, they are treated as being present in New Zealand only on the first 42 days of that period. When subsection (5) applies 4 Subsection (5) applies if the person or child— a is absent from New Zealand for a continuous period of more than 42 days; and b returns to New Zealand; and c is absent from New Zealand for a subsequent period within 42 days of their return. Trips within 42 days of each other 5 Despite subsections (2) and (3) , the person or child is not treated as being present in New Zealand on any day in the subsequent period referred to in subsection (4)(c) . Return travel delayed or prevented 6 If the intended return to New Zealand of a person or a child is delayed or prevented because of the occurrence of a natural disaster, either in New Zealand or outside New Zealand, or a crisis event, the person or child is treated as being present in New Zealand for the period starting on the day of their intended return and ending on the first day they could reasonably practicably return to New Zealand. Notification and evidence 7 A person who has a tax credit arising under any of sections MD 1, ME 1 (Minimum family tax credit), and MG 1 (Best Start tax credit entitlement) must— a notify the Commissioner if subsection (6) applies; and b provide evidence satisfactory to the Commissioner— i of the day of their intended return that was delayed or prevented and the reason for that delay or prevention; and ii that a specified day is the first day they could reasonably practicably return to New Zealand. Presence for part days 8 For the purposes of this section, being present in New Zealand for part of a day is treated as being present in New Zealand for the whole day and not absent for any part of the day. Relationship with section MD 7C 9 Section MD 7C overrides this section. child, Commissioner, crisis event, New Zealand, notify, tax credit MD 7C Modification of presence requirements for certain types of absences What this section does 1 This section modifies the presence requirements in section MD 7 for the purpose of applying those requirements to a person or a child when the person or child is absent from New Zealand for a continuous period of more than 42 days. Absence for schooling 2 A child who is absent from New Zealand is treated as being present in New Zealand for the period of their absence if the absence is to attend— a primary or secondary schooling outside New Zealand: b a sporting or cultural tour or event outside New Zealand. Absence for Government service 3 A person, and any child who accompanies that person, who is absent from New Zealand is treated as being present in New Zealand for the period of their absence if the person is absent— a in the service, in any capacity, of the New Zealand Government; or b because they are accompanying their spouse, civil union partner, or de facto partner who is in the service, in any capacity, of the New Zealand Government. Absence for other events 4 A person or child who is absent from New Zealand is treated as being present in New Zealand for that part of the period of their absence that is the result of any of the following: a the death, serious illness, or serious injury of the person, child, or a family member of either the person or the child: b the person, child, or a family member of either the person or the child is seeking medical treatment not available in New Zealand: c the person, child, or a family member of either the person or the child is subject to, or been called as a witness to, criminal proceedings outside New Zealand. Notification and evidence 5 A person who has a tax credit arising under any of sections MD 1, ME 1 (Minimum family tax credit), and MG 1 (Best Start tax credit entitlement) must— a notify the Commissioner if any of the circumstances set out in subsections (2) to (4) apply to the person or the child; and b provide evidence satisfactory to the Commissioner of the circumstances. Relationship with section MD 7B 6 This section overrides section MD 7B . child, civil union partner, Commissioner, de facto partner, New Zealand, notify, spouse, tax credit Subsection (1) applies for the 2027–28 and later income years. 21 New sections MZ 4 and MZ 5 inserted After section MZ 3, insert: MZ 4 Family scheme income when main deposit made in 2026–27 or earlier income year When this section applies 1 This section applies for the purpose of determining under sections MB 1, MB 4, and MB 7 (which relate to adjustments for calculation of family scheme income) the amount that is included in the family scheme income of a person when a main deposit made to a main income equalisation account in the 2026–27 or an earlier income year is refunded to the person in the 2027–28 or a later income year under any of sections EH 10, EH 13, EH 15, EH 17, and EH 23 (which relate to refunds of deposits made to main income equalisation accounts). Refunds of main deposit 2 The person’s family scheme income does not include the amount of the main deposit refunded to the person in the 2027–28 or a later income year. amount, family scheme income, income year, main deposit, main income equalisation account MZ 5 Presence requirements for person or child not present in New Zealand on 1 April 2027 When this section applies 1 This section applies to— a a person referred to in section MC 2 (Who qualifies for entitlements under family scheme?): b a child referred to in section MC 4 (Second requirement: principal care). Start date for period of absence 2 For the purposes of sections MC 5B and MD 7B (which relate to modification of presence requirements for temporary absences) and determining the period for which the person or child has been absent from New Zealand, if the person or child is not present in New Zealand on 1 April 2027, the period of absence of the person or child is treated as beginning on 1 April 2027. child, New Zealand 22 Section YA 1 amended (Definitions) This section amends section YA 1. In the definition of contract activity or service , after paragraph (b)(ii), insert: iii providing the use of, or right to use, in New Zealand, an aircraft or parts of an aircraft under a dry lease Insert, in appropriate alphabetical order: crisis event is defined in section MC 5B(7) (Modification of presence requirements for temporary absences) for the purposes of that section and section MD 7B (Modification of presence requirements for temporary absences) Insert, in appropriate alphabetical order: dry lease means an agreement providing for the use of an aircraft or aircraft parts under which the lessee is responsible for providing crew, maintenance, and insurance In the definition of family member , after family member , insert , in section CW 31 (Services for members and former members of Parliament), . In the definition of New Zealand resident , repeal paragraph (b). Insert, in appropriate alphabetical order: removed company is defined in section EW 29(9C) (When calculation of base price adjustment required) for the purposes of that section Subsection (3) applies for the 2027–28 and later income years. 23 Schedule 38 repealed (Acts exempting income from tax: income included in family scheme income) Repeal Schedule 38. 24 Amendments to Student Loan Scheme Act 2011 Sections 25 to 27 amend the Student Loan Scheme Act 2011. 25 Cross-heading above section 215 replaced Replace the cross-heading above section 215 with: Secondary legislation 26 New section 215A inserted (Orders in Council) After section 215, insert: 215A Orders in Council 1 The Governor-General may, from time to time, by Order in Council, amend Schedule 3, clause 5(2) by— a adding a statute, if the statute provides for an exemption from income tax, for salary or wages, that is to be ignored in determining the adjusted net income of a person for an income year: b removing a statute. 2 An order under this section is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements). 27 Schedule 3 amended (Adjustments to net income for purposes of section 73, applying from 1 April 2014 for 2014–2015 and later tax years) In Schedule 3, clause 5(b), replace Schedule 38 of the Act (Acts exempting income from tax: income included in family scheme income) with subclause (2) . In Schedule 3, clause 5, insert, as subclause (2): 2 The following are the Acts referred to in subclause (1): a the Arbitration (International Investment Disputes) Act 1979: b the Consular Privileges and Immunities Act 1971: c the Diplomatic Privileges and Immunities Act 1968: d the International Finance Agreements Act 1961: e the Pitcairn Trials Act 2002. 28 Amendment to Tax Administration Act 1994 This section amends the Tax Administration Act 1994. Repeal section 225C.