On Thursday 22 May, the Minister of Finance, The Honourable Nicola Willis, delivered Budget 2025 announcing that the budget secures New Zealand's economic and fiscal recovery and advances reforms to make New Zealanders better off in the future.
The economic outlook from the Budget was cautious but optimistic, with Real GDP growth expected to accelerate to 2.9 percent.
Capital investment was high on the Government’s agenda, with government initiatives focused on additional investment in health, education, law and order and the strengthening of New Zealand’s defence forces.
What's the Impact for Small Business?
Here's a quick a look at the Budget 2025 announcements that will have a direct impact on your small business, and how they may help drive your growth and investment.
New ‘Investment Boost’ initiative to drive growth
Investment Boost is a brand new scheme that encourages businesses to invest in machinery, tools, equipment, vehicles and technology. The aim is to drive productivity, make companies more competitive and give employers the additional funds needed to improve workers’ wages.
You’ll be able to deduct 20% of the cost of a new asset, on top of depreciation, leading to a lower tax bill in the year of purchase and a boost to your operating cash flow.
The scheme is available now for all Kiwi businesses, regardless of size. The 20% deduction applies to new assets purchased after 22 May 2025 in New Zealand or imported, and includes new commercial buildings. The scheme excludes land, residential buildings and used assets).
An increase to the KiwiSaver contribution rate
The default rate of employee and employer contributions for KiwiSaver will rise from 3% of salary and wages to 4%, in two steps. From 1 April 2026, the rate will rise to 3.5% and, from 1 April 2028, it will increase to 4%. The increases are being phased in over a three-year period to help workers and employers plan ahead.
Employees will be able to temporarily opt down to the current 3% rate, if they choose. You’ll be able to match that rate, as their employer, until they choose or are forced to revert the new rate.
From 1 April 2026, the Government will extend employer matching to 16 and 17-year-olds, which could have a significant impact if you employ a large number of younger employees.
Support for foreign investment
The Government has set aside $65 million to encourage foreign investment in New Zealand infrastructure by increasing the amount of tax deductible debt.
Increased funding for Inland Revenue compliance
An additional $35 million per year was announced for compliance activities by the Inland Revenue. This is expected to generate $280 million in extra tax revenue, indicating a focus on tax enforcement that businesses should be aware of.
Other Coming Changes
The Government also announced its intention to proceed with reform previously consulted on:
Fringe benefit tax — proposals to streamline the rules with a view to reducing compliance costs. However, this streamlining could change a number of current exemptions, meaning businesses may be exposed to increased FBT obligations.
Employee share scheme timing issues — proposals to address a taxation timing issue for employee share schemes offered by start-up or small companies.
We'll keep you posted on these reforms as they unfold.
You can view an overview of Budget 2025 here.
If you’re concerned about the increases to KiwiSaver employer contributions, or keen to understand how to make best use of the new Investment Boost 20% deduction for new asset purchases, do come and talk to us. We’ll be glad to answer your Budget 2025 questions and advise on any new schemes.
