Budget 2025

Tax: A welcome Investment Boost – and signals for the future of KiwiSaver

Budget 2025 brought us a welcome surprise: the Investment Boost which accelerates depreciation for spending on new assets. This is a positive move for attracting more investment into New Zealand, although there are some details still to be ironed out. 

There are two big winners, and the first is the commercial property sector. Depreciation for commercial property has been turned on and off like a light switch over the past five years. With the Investment Boost, new commercial buildings can claim 20% depreciation as an up-front one-off benefit – and if you never sell, it’s essentially a permanent saving. Commercial property owners can also take advantage of the Investment Boost to deduct the cost of improvements such as seismic strengthening. For example, if you own a chain of hotels and need to spend $50 million on earthquake strengthening, you can potentially claim 20% back in the first year improvements are complete. The cash saving is effectively the tax effect of the 20% being a 5.6% benefit on the proviso there is taxable income to be offset by the deduction.   

The second big winner is businesses that invest in large assets with low depreciation rates. For example, a farm that installs a new $1 million dairy shed can usually depreciate it at 4%, but now the farm can claim $200,000 in depreciation in year one in addition to the normal 4% depreciation (now calculated on a $800,000 base). Or consider an onshore wind farm where each turbine might cost $4 million and would normally be depreciated at 13.5%. The total upfront depreciation could be worth millions, depending on the scale of the project. 

For small businesses and those buying items with high depreciation rates, like IT hardware, it’s not a huge change, but it will improve cashflow. 

Overall, the Investment Boost is a positive step for NZ Inc and is a strong signal of support for New Zealand’s economic growth. By encouraging business investment across all sectors, it has the potential to lift productivity, drive innovation, and strengthen the foundations of the economy for the long term. 

KiwiSaver changes signal a shift to a higher retirement age and means tested super 

The changes to KiwiSaver provide yet another indication of the direction our superannuation scheme is taking. In its early days, KiwiSaver was an opt-in scheme with lots of freebies to make it attractive: a $1,000 kickstart, a $1,040 government contribution, and employer tax credits. Since then, it has gradually shifted funding away from the government and onto individuals and employers. Now government contributions are a quarter of that, we have no kickstart, you need to opt out rather than opt in, there are no employer tax credits and minimum contributions for both employers and employees are increasing. 

Budget 2025 also moved KiwiSaver government contributions away from the highest earners, in favour of 16- and 17-year-olds, yet another signal of an overall shift to restricting government ‘carrots’ for KiwiSaver members. From here, expect to see personal and employer contribution rates creep up, opting out to get more difficult, and government contributions limited to the lowest earners. 

The expansion of means testing for KiwiSaver and Best Start may signal a broader policy shift toward more targeted and income-based government support in the long term. While there’s no formal proposal to means test superannuation, it’s an area that may come under closer scrutiny in the future – particularly as conversations continue around long-term affordability.

Beyond the headlines, Budget 2025’s tax changes indicate a clear push to stimulate business investment in the short term. At the same time, they continue a gradual shift in KiwiSaver policy toward greater individual responsibility, while subtly exploring the potential for expanded means testing.

Health and aged care: Nothing to alleviate growing pressures on rest homes 

Budget 2025 introduced some good initiatives in healthcare that should make a positive difference in the lives of everyday Kiwis. Expanded urgent care and afterhours access will help reduce the number of admissions to the emergency departments of our public hospitals. It should be easier to get appointments with your GP in a timely manner – a recent RNZ poll found that one third of people waited more than two weeks for a GP appointment. 

It's also encouraging to see continued investment in upgrading facilities, particularly the $1 billion in redevelopment funding for Nelson Hospital, Palmerston North Hospital, and Wellington Hospital’s Emergency Department. That will be a vital boost for those regions, but there is still a lot of aging infrastructure nationwide that is well overdue for replacement. 

How will the switch to 12-month prescriptions impact general practice? In the short term it might reduce revenue. Over time, though, it should free up GP capacity, allowing doctors to spend less time on repeat prescriptions and more time focused on more acute needs. 

Significant challenges in primary care remain. Despite a funding package announced earlier in the year that allocated $285 million in a ‘performance funding pool’ spread over three years, there were caveats that will exclude many practices. GPs tell us they would have preferred to receive more funding directly, with fewer strings attached, that would allow them to pay better wages and attract more doctors. 

Recruitment remains a huge issue for the entire sector – the Budget has allocated funding to train more doctors and nurses locally, but this takes time and won’t address the immediate need. The 100 placements for overseas-trained doctors will help, but more could have been done. Generally, the feeling from GPs is that they have been left out of the conversations around this year’s Budget, and they aren’t yet certain how much these initiatives will aid in addressing their day-to-day challenges. 

Funding to move seniors out of hospital beds – but will there be anywhere for them to go? 

It was pleasing to see the Budget introduce targeted funding to help transition seniors from hospital beds to aged care facilities. That frees up public hospital beds to deal with critically ill younger patients, rather than those who should be in aged care. 

However, it does nothing to alleviate a fundamental problem: what if there is no facility for unwell seniors to transition into? Rest homes are struggling. If they remain unprofitable, existing facilities will close and nobody will invest in building new ones – particularly in the regions where recruitment is a huge problem. Elderly people in hospital with no available beds in local rest homes will either stay in hospital, taking up a valuable bed, or move to an unfamiliar area where they might not have friends or family members nearby.

Those in the aged care sector were disappointed; they had made a lot of noise in the months leading up to the Budget, highlighting the industry’s issues to various ministers. They would like to see a lot more support, alongside greater recognition of profitability challenges and rising costs. 

It is very difficult to attract staff for aged care. Rest homes must offer incentives like staff accommodation, rent subsidies, or travel costs. Now, they also face compulsory higher wage costs due to KiwiSaver contribution hikes. All these costs come out of owners’ back pockets, diluting margins and making the sector less attractive. The only upside is the Investment Boost, which may help accelerate the funding of new equipment and construction. 

Overall, the lack of attention to aged care is leaving some tough conversations for future governments. This is a problem that will only become more urgent as our population ages.

Property and construction: A win for the industry that will change the way projects stack up

The Investment Boost is a win for the entire property and construction sector. It is a significant incentive to invest in new assets, which includes not only new capital assets, but also (surprisingly) new commercial buildings and some capital improvements to existing assets that would ordinarily represent a sunk cost. While the 20% deduction is a timing benefit for most assets, as commercial buildings are no longer able to be depreciated, this announcement really does offer something for nothing. Think of it as an interest free Government loan for the duration of the property ownership.

New property projects are now more likely to stack up as the effective discount on purchase (through reduced tax burdens) is between 5.6% and 7.8% of the building value depending on the ownership structure being used. This announcement is an unexpected bonus to those currently partway through developing new commercial properties, whereby sheer good fortune they can benefit from this announcement once the project has been completed. 

No doubt this announcement will influence purchasers’ behaviour due to the immediate deduction that can be obtained from buying new versus no deduction from buying existing stock.  It will definitely feature in the decision making process and  return on investment calculations. 

Time to start earthquake strengthening 

It appears that capital improvements, like seismic strengthening, will also qualify under the Investment Boost policy. This is excellent news, because there is no shortage of seismic strengthening required to buildings all over the country. Owners have been holding off on strengthening work, in part, because it’s a dead cost where no tax deduction was previously available. A 20% tax deduction may be just the right amount of motivation to bring these projects back online. 

Given this incentive could disappear as quickly as it was introduced, I’d expect to see an increase in this type of remedial work so owners can take advantage of it.

Film and TV: $577m investment our ‘ticket to the game’ 

New Zealand’s film and TV production industry will get an additional $577 million in support over the next four to five years; this tops up the existing funding scheme to $1.09b. That might sound like a substantial sum, but it’s only our 'ticket to the game', as Finance Minister Nicola Willis described it. 

Those we’ve spoken to in the industry are pleased to see this positive endorsement of its role as a key contributor to our economy. Film and TV productions not only generate $3.5 billion annually, but also grow jobs, upskill Kiwis and support the production of local content. 

Offshore productions can get a 20% cash rebate on local expenditure, and it’s fantastic to be able to attract massive projects the likes of Avatar and Gollum. But the rebate will be used far more frequently to support locally produced and owned content. Eligible New Zealand productions can get a 40% cash rebate up to a cap of $6 million. And by partnering with local companies, international productions can increase their access to the rebate, which is a win-win for the sector. 

Rebates need regular revision

While it’s great that New Zealand has its ticket to the game, this is really just a continuation of an existing scheme, and the rebates are overdue for revision to ensure rates and thresholds are keeping pace with what other countries are offering. Ideally, these should be reviewed and updated at regularly.

Finally, how will our local film and TV sector weather the storms if Trump goes ahead with his 100% non-US movie tariff? Our industry clients tell us they’re continuing with business as usual, taking a wait and see approach. It’s hard to see how this tariff could realistically be enforced – and it may be in breach of the WTO’s moratorium of the tax on intellectual property. Almost all film and TV projects take a long time to come to fruition, so the situation could change a lot by the time a production gets the green light. US dollars have been great for our local industry, but if pressed, resourceful Kiwis will find other trade partners.