The Government confirmed today in the Budget it will push ahead with changes to the thin capitalisation rules that invest in New Zealand.

The proposals were first announced for consultation in January this year. They would widen the thin capitalisation net to capture situations where a group of foreign investors “act together” to invest in New Zealand. The specific target is private equity arrangements.

Revenue Minister Peter Dunne noted that further technical details still need to be worked through.

Therein lies our concern. The current proposals hinge on a definition of “acting together” and the Government will need to be very careful not to cast its net too wide and discourage otherwise unrelated foreign investors from investing in New Zealand.

 The initial proposals could have been implemented as early as 1 April 2014 but today the Government advised they would apply from 2015/16.