Fiscal Restraint was a key theme in this year’s budget, prompted by lower-than-forecasted GDP growth and surpluses not expected till 2029.
We highlight some of the key tax measures below:
Investment Boost
Key Aspects
- Effective immediately (22 May 2025) businesses will be able to deduct 20% of the cost of any new investment assets (depreciable assets). The balance of the assets will be capitalised as normal. For example:
If a new asset is purchased for $10,000, $2,000 (20%) can be expensed to the profit and loss straight away and the remaining balance of $8,000 can be capitalised and depreciated in line with normal tax depreciation rates.
- New assets are defined as assets used for the first time in NZ on or after 22 May 2025.
- Second-hand goods are only eligible if imported from overseas.
- It applies to assets in excess of $1,000 as these can already be expensed.
- The boost is optional, so taxpayers can choose not to use the boost and depreciate the asset under the current depreciation rules.
Buildings
- The boost will also apply to new commercial and industrial buildings.
- It can also apply to new Improvements to existing buildings.
Disposal of the Asset/Buildings
- On disposal, the investment boost is treated like additional depreciation. If the asset is sold above its adjusted tax value, then there will be a depreciation recovery subject to tax.
Assets Not Eligible for the Boost
- It will not apply to fixed life intangibles, land, trading stock or residential buildings.
- It will not apply to secondhand goods (except imported goods as noted above).
KiwiSaver
The default rate for employee and employer contribution will rise to 3.5% from 1 April 2026, and 4% from 1 April 2028.
The annual contribution by the government will be halved from 1 July 2025. It will also be means-tested. Anyone earning over $180,000 will not be eligible. The age to qualify for the government contribution has been reduced from 18 to 16 years of age.
Thin Capitalisation
Consultation will begin with a review of the thin capitalisation rules. The objective is to make it easier for foreign investors to invest in infrastructure assets in NZ. Current rules restrict interest deductions for interest on debt in excess of 60% of an asset’s value.
Need help?
If you would like assistance in interpreting these changes and how they may affect your individual or business circumstances, please contact the team at Alliott NZ in Newmarket Auckland on 09 520 9200.
