IRD proposes major changes to shareholder loan taxation

What’s changing?

Inland Revenue has released proposals that would significantly change how shareholder loans are taxed. If implemented, these changes would limit the ability for shareholders to extract funds from their company through long-term loans without paying tax.

Why Inland Revenue is acting
IRD is concerned that shareholder loans are being used as a substitute for dividends or salary, allowing tax to be deferred or avoided. Their data shows large loan balances often remain unpaid — particularly when companies close — resulting in tax never being collected.

The key proposals

• New shareholder loans (from 4 December 2025) may be treated as taxable dividends if:
  • Total loans exceed $50,000 per company, and
  • The loan is not repaid within 12 months after the end of the income year
• Any outstanding shareholder loan will become taxable income when a company is struck off or liquidated.
• Companies may be required to keep more detailed records of capital and loan balances.

What this means for you

• Shareholder loans will become a short-term cashflow tool only
• Long-term or informal loan balances may trigger unexpected tax
• Company closures or restructures will need more careful planning
• More emphasis will be placed on salary and dividend planning

What you should do now
If you currently have, or plan to use, shareholder loans:

• Review your loan balance regularly
• Plan repayments before they become long-term
• Talk to us before closing or restructuring a company

These are proposals only at this stage, but they signal a clear change in direction. We are monitoring developments closely and will contact affected clients as details become clearer.

If you have any questions or would like us to review your position, please get in touch.