Other tax related changes announced in Budget 2025 include changes to KiwiSaver, Working for Families, and increased funding for Inland Revenue compliance and tax debt management.
The Investment Boost allows for businesses to elect to take a deduction for 20% of the cost of new assets in the year of purchase. The Investment Boost will apply to purchases of new assets that are depreciable for tax purposes such as machinery, equipment, and motor vehicles. Included in the Investment Boost is the purchase of new commercial and industrial buildings, currently subject to a 0% depreciation rate. It will also include assets which are entitled to depreciation like deductions such as to improvements to farmland, planting of listed horticultural plants, improvements to aquacultural business, and improvements to forestry land.
The Investment Boost is in addition to any depreciation or amortisation deduction that would be allowed for the asset. This change will apply from 22 May 2025.
KiwiSaver changes include a staged increase in the minimum employer and employee contribution from 3% of salary or wages to 4%. From 1 April 2026, the minimum rate will increase to 3.5% with the full increase to 4% taking effect from 1 April 2028. Employees will be able to temporarily opt to keep their contributions at 3%. The Government contribution to KiwiSaver will be extended to 16- and 17-year-olds from 1 July 2025 with employers being required to contribute to the KiwiSaver of 16- and 17-year-old employees from 1 April 2026.
However, the Government is halving its contribution to KiwiSaver to 25 cents for each dollar a member contributes, up to a maximum of $260.72 per annum (down from $521.43 per annum) from 1 July 2025. Further those earning more than $180,000 per annum will receive no government contribution from 1 July 2025.
The Government is making changes to Working for Families to better target help to low and middle-income families with children. The Working for Families abatement threshold will increase from $42,700 to $44,900 and raising the rate from 27 per cent to 27.5 per cent. This will provide up to $23 a fortnight extra to those families with incomes near the new threshold and an average increase of $14 a fortnight for the 142,000 eligible families.
However, payments of the Best Start tax credit will begin to abate from an income of $79,000 and will abate completely by a family income of $97,000 per annum. This is in line with the existing abatement thresholds for the second and third years of the Best Start tax credit.
In addition, the Government has released a discussion document with proposals to make Working for Families payments more accurate by using prior year income and shorter periods to assess entitlements.
The Government will extend the $26.5 million per annum funding for Inland Revenue’s tax compliance and debt management activities, originally allocated in Budget 2022 and set to expire this year, for another four years.
The Government is also providing an additional $35 million per year for Inland Revenue tax compliance and debt management activities. This additional funding is expected to recover an additional $4 of tax for every $1 spent in the 2025/2026 tax year and an additional $8 for every $1 spent in the 2026/27 year and beyond.
Budget 2025 focuses on stimulating economic growth, with the Investment Boost standing out as the key tax measure designed to encourage business investment in capital assets. With the extension of existing funding, and the addition of significant new funding, for the Inland Revenue’s compliance and debt management activities means we can expect Inland Revenue to continue to increase activity in these areas.
This article contains general information and does not constitute legal or taxation advice. If you need legal or taxation advice, we recommend you speak to a qualified adviser.
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