‘Fiscally conservative’?
On 22 May, the Minister of Finance, the Hon Nicola Willis, presented what she had termed a ‘No BS Budget.’ It is officially entitled ‘The Growth Budget.’
Described by the minister as being ‘fiscally conservative,’ public expectations were not high for a lolly scramble of funding for new initiatives.
In the weeks leading up to the Budget, the minister drip-fed announcements of about $1.9 billion of new spending and, amongst others, a significant ‘restructure’ to the pay equity regime. As a result, it was anticipated that on Budget Day, there would be what the minister has called ‘reprioritising of spending.’
Over the past few years, New Zealand has experienced an extended period of high inflation, high interest rates and low growth. With this 2025 Budget and despite worldwide geopolitical and geoeconomic tensions, the minister has indicated New Zealand’s fiscal outlook will gradually recover, despite an initial period of retraction. The government now expects what the minister has called ‘a modest surplus’ by 2028–29.
Good news for business
Called Investment Boost, businesses can now write off 20% of the value of productive new assets such as machinery, tools and equipment from that year’s taxable income – in addition to regular depreciation rates. By encouraging investment, the government expects a 1% increase in GDP and wages by 1.5% over the next 20 years, with half of these gains being in the next five years.
Greeted positively by the business sector, these new rules came into force on 22 May, passed under urgency after the Budget was presented.
Intended to attract foreign investment to this country, the government has created a new agency, Invest New Zealand. The agency’s objective is to create a vibrant investment market in this country. Initially collaborating with New Zealand Trade and Enterprise, Invest New Zealand has a clear direction to attract international capital, ideas and expertise in order to lift wages and grow the country’s economy.
Additionally, the government says it will be easier for startups to compete for talent by changing how employee share schemes are taxed.
Supporting New Zealand’s strong position in the film industry, screen production rebates will be renewed.
Government cuts contributions to KiwiSaver
The government’s contribution to KiwiSaver accounts is to be halved. Until now, KiwiSaver account holders have received $521 a year from the government; this is to be cut to $260.72.
In addition, the threshold for the minimum ‘default’ rate of employee and matching employer KiwiSaver contributions is to be increased from 3% to 4%; this is to be a two-step process over the next three years. This will be optional; KiwiSaver account holders may opt to stay at 3%. With many KiwiSaver balances ‘modest,’ the minister says this change should encourage New Zealanders to save more for their retirement.
More positive news for New Zealand’s younger taxpayers is that 16 and 17-year-olds will start to receive government contributions to their KiwiSaver from July (currently there is no contribution). Requirements for employers to match these deposits will start in 2026.
Benefits
Jobseeker and emergency benefits to be means tested: Not anticipated by pundits, 18 and 19-year-olds will have their Jobseeker and emergency benefits tested against their parents’ incomes, although there are some exemptions. The threshold against which these benefits will be measured is yet to be decided.
Medicine prescriptions: The length of a prescription is to be extended from three months to 12 months.
Working for Families: Targeted at low to middle-income families with children, the family income threshold and abatement rate will increase by an average of $14/fortnight. The additional cost for this will be funded by extending the income testing for the Best Start tax credit to include the first year after having a child, as well as the current situation of means testing for the second and third years. Payments will cease when a family’s income reaches $97,000 a year.
SuperGold card: A rise in the income threshold will allow a rates rebate for 66,000 additional lower income households with a SuperGold cardholder.
Disability Support Allowance: $760 million has been allocated to support the disability sector. The government has called this a ‘seismic shift’ in funding.
More . . .
Already announced and included in Thursday’s Budget is more funding for health, education, law and order, and other frontline public services. This includes:
- Significant additional funding for the education sector for children with additional learning needs, schools/early childhood education and tertiary operational grants; additional help with maths skills; and lifting school attendance,
- Nelson Hospital is to undergo a much-publicised need for redevelopment, together with Wellington’s emergency department. Auckland hospitals are to be upgraded,
- After decades of underinvestment, the country’s rail will receive a $460 million upgrade to the metro and regional rail networks, and
- The Defence Force will receive significantly more investment to boost New Zealand’s capabilities for the army, navy and air force, and in cyberspace.
To read the Budget in more detail, click here for the minister’s Budget speech.
If you would like to discuss the implications of the government’s business incentives, please don’t hesitate to contact us.