Budget 2025: The Impact for Your Small Business
Richard Matson
On Thursday 22 May, the Minister of Finance, The Honourable Nicola Willis, delivered Budget 2025. Opening her speech, the Minister said:
“This is a responsible budget to secure New Zealand's future. It supports the economic recovery now underway. It also takes a longer-term view with initiatives to boost future investment savings and growth.”
Growing GDP and a brighter outlook for the economy.
The economic outlook from the Budget was cautious but optimistic, with the Government keen to push New Zealand out of recession and to reiterate that brighter times lie ahead.
Real GDP growth is expected to accelerate to 2.9 percent, leading to more jobs, higher incomes and opportunities for businesses and families to get ahead.
Capital investment was high on the Government’s agenda, with government initiatives focused on health, education, law and order and the strengthening of New Zealand’s defence forces.
The Impact for Small Businesses
Let’s take a look at the Budget 2025 announcements that will have a direct impact on your small business, and how these initiatives may help to 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 in New Zealand or imported, and includes commercial buildings (excluding 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 still be able to match that rate, as their employer. You may wish to do that, for example, if you feel you’re unable, for a time, to afford an increased contribution.
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.
Capital Investment in NZ Infrastructure
The Government announced significant capital investment in the country’s infrastructure, with $1 billion for hospitals and other health facilities, over $700 million for new schools and $2.7 billion (includes $1.6 billion from Budget 2026) for the New Zealand Defence Force to boost capability.
Over $460 million was also committed by the Government to upgrade New Zealand’s rail network to keep people and freight moving.
For businesses and contractors, this large investment in infrastructure projects could lead to profitable contracts, ongoing work and a boost to revenues.
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.
Science and Innovation Reforms
Funding support was announced for the transformation of Crown research institutes, establishment of a gene technology regulator, and the creation of Invest New Zealand as a one-stop shop for foreign direct investment.
Funding for the Elevate New Zealand (NZ) Venture Fund
The Government announced additional funding for the Elevate NZ Venture Fund. This fund encourages venture capitalists to invest in the Kiwi technology start-up sector.
Elevate is a government-funded programme, investing into venture capital funds and aimed at filling the Series A and B capital gap for high-growth Kiwi technology companies.
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.
Talk to us About Budget 2025
You can view an overview of Budget 2025 here.
If you’re concerned about the increases to KiwiSaver employer contributions, or keen to use 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.
