The infamous do-they-don’t-they decade-long saga of whether GST applies to funds management fees has spawned a sequel as the Inland Revenue Department (IRD) gears up to consider the same issue in respect of retirement schemes such as KiwiSaver.
According to the most recent IRD schedule of work, the tax department is scoping out a plan to define the meaning of ‘management of a retirement scheme’ and how GST might apply to various associated ‘financial services’.
The IRD note says the department “is aware of uncertainty about the scope of the phrase ‘management of a retirement scheme’ and whether it extends to outsourced services provided by third parties”.
Under a landmark ruling handed down at the end of March, the tax authorities declared fund management fees would be zero-rated for GST while outsourced admin attracts full-whack, ending at least 10 years of policy ping-pong.
Official thinking spun between applying 100 per cent GST to fund fees – a measure legislated by the-then Labour-led government in 2022 before a quick backhand reversal – and the zero point ultimately named as winner this year. In the interim, managers typically followed the informal industry-brokered compromise of hitting fund fees with a 10 per cent GST.
The new policy takes effect from the 2026 tax year but the retirement scheme exemption remained as something of a cliffhanger plot device in the final IRD paper.
As per the March 2025 interpretation statement, the IRD says “a manager of a managed fund that meets the definition of a “retirement scheme” will be providing an exempt supply in providing their services to the managed fund”.
“… this exemption will include any other goods and services the manager provides that are reasonably incidental or necessary to those services.”
But clearly the IRD position on the GST of retirement schemes and associated services requires some polishing.
At the same time, the department has a couple of other investment industry-related issues in nut-out phase including the “income tax consequences for New Zealand resident investors of investing in Australian unit trusts [AUT]”. The AUT consultation closed in March with policy recommendations before decision-makers.
Furthermore, the IRD is currently “considering issues” around how to tax cryptocurrency transactions in so-called ‘decentralised finance’, or defi, arrangements.
“There are an increasing number of cryptoasset holders undertaking defi transactions and some uncertainty about how the transactions are treated for tax purposes,” the IRD says in what could be the next summer blockbuster.