Budget 2025: Tax Changes

There were two key tax changes in this year’s budget as follows:
·         A new 20% “investment boost” tax deduction for new business assets.
·         Changes to KiwiSaver settings, including an increase to both employer and employee minimum contribution rates and reductions in the Government contributions.

INVESTMENT BOOST

From 22 May 2025, the Investment Boost allows businesses to receive an upfront 20% tax deduction on the purchase of new assets.
This deduction is in addition to the tax depreciation that can be claimed, noting that the cost base of the asset for depreciation purposes is reduced by the 20% tax deduction available in the year of purchase.
The Investment Boost applies to the purchase of most assets that are depreciable for tax purposes. For example, machinery, equipment and work vehicles. The Investment Boost also applies to the purchase of new commercial and industrial buildings on which depreciation deductions were no longer allowed from 1 April 2024.
Other costs that may be eligible for the Investment Boost include:
·         New and secondhand assets that have been imported from overseas and not previously used in New Zealand may be eligible for the Investment Boost.
·         Improvements to depreciable property are eligible if the asset they are improving is eligible for the Investment Boost.
Other assets that are allowed deductions similar to depreciation, but are not depreciable property, such as improvements to farmland, planting of listed horticultural plants and improvements to forestry land etc.
Assets purchased for both business and private use are still eligible for the Investment Boost, but only on the business-use portion of the asset.
It is important to note that the Investment Boost does not cover:
·         Assets that have previously been used in New Zealand
·         Land
·         Trading stock
·         Residential buildings (dwellings)
·         Fixed life intangible assets (i.e., patents)
·         Assets that are fully expensed under other rules
The Investment Boost is optional for new assets and is claimed in the business’s income tax return covering the year the new asset is purchased.
The 20% deduction available under the Investment Boost will reduce the asset’s adjusted tax value. Just like with depreciation, some or all of the deduction may be recoverable (a taxable recovery) if the asset disposed of is sold for more than the adjusted tax value at the time of sale.
General examples are now available in the Commentary to the Taxation (Budget Measures) Bill (No.2).
We will provide further guidance on the Investment Boost as information is released

KIWI SAVER CHANGES

The amendments to KiwiSaver include:
·         An increase in the rate of employer and employee KiwiSaver Contributions.
·         A reduction in the KiwiSaver government contribution to a new annual maximum of $260.72.
·         Eligibility for the government contribution would be restricted to those with an annual taxable income of $180,000 or less.
·         Eligibility for KiwiSaver and the government contribution would be extended to those aged 16 and 17 years.
·         The ability for KiwiSaver members to take a temporary rate reduction to allow them to continue their contributions at 3%.

Key dates in relation to the amendments to KiwiSaver amendments are:

1 July 2025
·         Extending eligibility for KiwiSaver and the government contribution for 16 and 17 year olds.
·         Increase in the taxable threshold for eligibility for the KiwiSaver government contribution.
·         The reduction in the KiwiSaver government contribution to $260.72
1 February 2026
·         KiwiSaver members are able to apply for a temporary rate reduction to 3% to take effect from 1 April 2026.
1 April 2026
·         Extending eligibility for compulsory employer KiwiSaver contributions to those aged 16 and 17.
·         Increase in the rate of employer and employee KiwiSaver contributions to 3.5%.
1 April 2028
·         Increase in the rate of employer and employee KiwiSaver contributions to 4%.