Budget 2025: What it means for NZ Businesses and You

Budget 2025 has been unveiled, and while it’s a lean one, it brings some important changes for businesses across Aotearoa. 

With a forecast return to a small surplus by 2028/2029, projected GDP growth of 2.9% in 2025/2026 and 3% in 2026/2027, and an extra 240,000 jobs expected by the end of the four-year Budget period, there’s cautious optimism about the economy’s direction. Inflation is tipped to stay steady and on target, and net core Crown debt is set to peak at 46% of GDP.

For Kiwi businesses, two key announcements stand out: the Investment Boost and changes to KiwiSaver. Let’s take a closer look at what these mean for you.

The Investment Boost

A major win for businesses is the Investment Boost – a new tax incentive aimed at encouraging capital investment. Businesses can instantly deduct 20% of the cost of new assets (including imported second-hand machinery and equipment) from their taxable income in the year of purchase. Best of all, there’s no cap on the deduction amount. These changes have already taken effect on the 22nd of May 2025.

Peter Vial FCA, NZ Country Head of Chartered Accountants ANZ, says this incentive is more generous than expected and could play a big role in lifting productivity. The reality is that New Zealand’s productivity problem isn’t down to a lack of effort, but rather a shortfall in investment in technology, machinery, and equipment. This incentive directly targets that gap.

If your business has been holding back on investments due to economic uncertainty, this could be the push you need. Sectors like manufacturing, healthcare, and education, which have been slower to invest, now have a real incentive to modernise.

Real-world example: Take Norsewear, a clothing manufacturer based in Hawke’s Bay. They recently invested in two $70,000 wool spinning machines, helping them beat out international competitors to land a big contract with the NZ Defence Force. It’s a great example of how smart investment can pay off.

Vial notes that while a more targeted approach might have been more efficient, this broad incentive should spark a lot of investment, especially in sectors where it’s badly needed.

KiwiSaver Changes

Budget 2025 also brings some significant changes to KiwiSaver, with both costs and opportunities for businesses and employees.

Here’s what’s changing:

• The default contribution rate will increase from 3% to 3.5% in April 2026, and to 4% in April 2028.

• From 1 July 2025, the Government’s contribution will be halved, to 25 cents for every $1 contributed, up to a maximum of $260.72.

• Higher earners (over $180,000) will no longer be eligible for the Government contribution.

• From 1 February 2026, KiwiSavers can opt down to the current 3% contribution rate for 12 months, and can reapply to do this in later years.

• Employer and Government contributions will now also cover 16- and 17-year-olds.
  

While the increase in contributions aims to improve retirement savings, many businesses might feel the pinch as the Government shifts more of the cost burden to employers. The phased rollout offers some breathing space, but it’s still a change businesses need to plan for.

For employees, especially those already feeling the squeeze from the rising cost of living, the higher contributions might be tough. The temporary opt-down option offers a bit of relief, though it could widen the existing gap in retirement savings – especially between men and women.

So, What’s the Bottom Line?

Budget 2025 sends a clear message: it’s time for Kiwi businesses to invest in the future. The Investment Boost provides a solid incentive to modernise, with immediate tax benefits for new (and imported) assets. On the flip side, the changes to KiwiSaver mean employers will need to prepare for rising contribution costs, while employees might face tough decisions about how much they can afford to save.

In a budget that’s been described as “growth on a shoestring”, these measures offer a mix of opportunities and challenges for businesses across the country. Staying on top of these changes will be key to navigating the next few years with confidence.

Let’s Chat About Your Next Steps

With the changes in Budget 2025, whether it’s making the most of the Investment Boost or adjusting to the KiwiSaver updates, we’re here to help you plan ahead.

Contact us at Affinity Accounting to talk through what these changes mean for your business.

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