Business and Tax Updates February 2026: IBBZ Accounting

Summary:

With 31 March 2026 approaching, now is the time to review your year-to-date performance, reconcile key accounts, and assess your provisional tax, GST, payroll, and cash-flow position. Early preparation allows time to address any outstanding issues, manage tax liabilities effectively, and make informed decisions before the financial year closes.

February has also brought several important updates from Inland Revenue and other regulatory bodies. In this edition, we highlight key tax, business, and compliance developments to help you stay informed and well-prepared as we approach year-end.

We also encourage you to visit our YouTube channel, Tax Accountant, where we share ongoing tax updates, compliance tips, and insights to help you manage your personal and business finances with confidence.

At IBBZ Accounting, we are committed to helping you stay compliant and plan with confidence. Our team is always here to support you throughout the financial year.

Thank you for your continued trust in our services. 

Key Business Updates

1. Official Cash Rate Update — February 2026 

The Reserve Bank of New Zealand has kept the Official Cash Rate (OCR) unchanged at 2.25% in its February 2026 Monetary Policy Review. This was widely expected by markets and follows the rate cut delivered in November 2025.

The decision reflects the Bank’s current view that inflation, which recently sat slightly above its target range, is likely to ease back toward the midpoint of the 1–3% target band over the year ahead. To support gradual economic recovery without adding undue inflationary pressure, the Monetary Policy Committee opted to leave the OCR at its present level for now.

Keeping the OCR on hold means borrowing costs are broadly stable for now, though wholesale interest rates and lenders’ pricing may adjust independently. The next OCR review is scheduled for 8 April 2026.

Important Tax Updates

1. 2025 Income Tax Returns and Planning - End of Year Approaching

With the 31 March 2026 financial year-end approaching, businesses should begin preparing their records for income tax return filing.

Ensure your financial statements and accounting records are complete and up to date. This includes reconciling bank accounts, confirming all income and expenses up to 31 March have been recorded, and reviewing any unpaid invoices or accruals.

It is also important to check asset purchases and depreciation, confirm GST and PAYE filings are consistent with your accounts, and review shareholder current account balances before year-end.

Early preparation helps avoid last-minute pressure, reduces the risk of errors, and allows time to plan for any expected tax liabilities.

2. Proposed Changes to Shareholder Current Accounts – What Business Owners Should Know

Inland Revenue is reviewing how shareholder current accounts are being used in closely held companies. Below is a simple overview of the key issues and what they mean for business owners.

• How shareholder current accounts are used

Many business owners withdraw money from their company during the year and record it as a shareholder loan instead of paying themselves salary or dividends. While this is common practice, it means the company has effectively lent money to the shareholder.

• Concern about tax deferral

Company profits are taxed at 28%, while individuals can pay up to 39% tax. Inland Revenue is concerned that by leaving withdrawals as “loans” rather than declaring them as income, some shareholders may delay paying the additional personal tax for extended periods.

• Long-standing unpaid balances 

Many shareholder loan balances remain outstanding for years. In some cases, companies are liquidated while the loan is still unpaid, meaning the additional tax may never be collected.

• Fairness and integrity concerns

Inland Revenue considers this inconsistent with the intent of the tax system, particularly when compared to business owners who pay themselves through salary or dividends and pay tax immediately.

• Proposed changes 

Inland Revenue is considering rules that could treat certain long-standing shareholder loans as taxable dividends if they are not repaid within a specified timeframe. A proposed threshold (for example, $50,000) may apply so that smaller balances are not affected.

• What Business Owners Need to Know and Do Now

Business owners should review their shareholder current account balances before year end and ensure proper documentation, interest treatment, and repayment arrangements are in place.

If your account is overdrawn, consider whether repayment, dividend declaration, or salary allocation is appropriate. Proactive planning now will reduce risk and provide flexibility should the proposed changes be introduced.