Budget 2025 introduces a series of significant tax updates that will affect businesses, families, and KiwiSaver members across New Zealand. Below is a clear, easy-to-follow breakdown of the major changes — including the new Investment Boost, updates to KiwiSaver, and adjustments to Working for Families and the Best Start tax credit.

1. Investment Boost: Extra Support for Business Investment

A major highlight of this year’s Budget is the introduction of the Investment Boost, designed to encourage New Zealand businesses to invest in new assets.

How it works

From 22 May 2025, businesses purchasing qualifying new or new-to-New Zealand assets can claim an additional 20% tax deduction in the year the asset becomes available for use. This comes on top of normal depreciation.

What assets qualify?

Most depreciable business assets, including:

• Machinery and equipment
• Work vehicles
• Newly built commercial or industrial buildings
• Certain land improvements and sector-specific assets

Some assets won’t qualify — for example, residential buildings, second-hand goods bought within New Zealand, and many intangible assets.

Why it matters

Because the deduction is taken upfront, businesses benefit from a lower tax bill in the year of purchase, giving a welcome cash-flow lift. Claiming the deduction is straightforward — your accountant will include it in your tax return for the relevant year as long as proper records are kept.

2. KiwiSaver: Major Changes to Contributions and Eligibility

KiwiSaver sees some of the most wide-reaching updates in Budget 2025. These changes will affect employee contributions, employer contributions, government top-ups, and eligibility for younger members.

Employee & Employer Contributions Increasing

Default contribution rates will gradually rise:

• 3.5% from 1 April 2026
• 4% from 1 April 2028

Employees who find the increase difficult can temporarily apply for a reduced rate.

Government Contribution Reduced

From 1 July 2025:

• The government match reduces from 50c to 25c per dollar contributed.
• The maximum annual government top-up falls from $521.43 to $260.72.
• Individuals earning over $180,000 per year will no longer receive the government contribution.

These changes do not affect contributions for the current KiwiSaver year — those will still be paid under the existing rules.

16–17 Year Olds Included

• Government contributions start for 16–17 year olds from 1 July 2025.
• Employer contributions begin from 1 April 2026.

3. Working for Families & Best Start: Updated Thresholds and Targeting

Significant adjustments are also coming to family tax credits.

Working for Families

Starting 1 April 2026:

• The abatement threshold increases from $42,700 to $44,900.
• The abatement rate increases from 27% to 27.5%.

This shift is intended to better align support with household income levels while maintaining Budget balance.

Best Start Tax Credit

Also from 1 April 2026:

• The first year of the Best Start payment becomes income-tested, consistent with the existing rules for years two and three.
• This applies to children born on or after 1 April 2026.
• Families will need to provide income information at the time of application starting in the 2026/27 year.