New Zealand Budget Update 2025

• Investment Boost initiative

As part of the Budget, the government has introduced Investment Boost, a tax incentive to encourage business investment in ‘productive assets’ to lift productivity and stoke economic growth. At a high-level, this new tax incentive allows a business to claim an immediate tax deduction equal to 20% of the purchase price of eligible new assets that are first available for use on or after Budget Day (22 May 2025).

This deduction is in addition to standard depreciation rules and is designed to stimulate commercial investment, enhance productivity and support long-term economic growth. Standard depreciation will be calculated on the value of the asset reduced by the Investment Boost deduction.

According to projections provided by the government, the increase in business investment via Investment Boost is expected to increase Gross Domestic Product (GDP) by 1%, capital stock by 1.6% and wages by 1.5% over the next 20 years, with approximately half of that growth occurring within the first five years. This initiative is expected to cost an average of $1.7 billion per year in reduced revenue.

For further details on how the tax incentive applies, please refer to the information sheet: Investment Boost information sheet or contact your William Buck Advisor.

• Best Start scheme

From April 2026, the Best Start child payment scheme will also become fully income tested in the same way the second and third years are, with payments cut off when a family earns more than $97,000 a year.

The Budget also includes an allocation of $35 million a year for Inland Revenue to carry out tax compliance and collection activities to go along with a continuation of funding of the $26.5 million a year provided in 2022 that was due to cease in June 2025.

From 1 April 2026, changes to KiwiSaver will help more New Zealanders save for their first home or retirement, while also enhancing the scheme’s long-term financial sustainability. Default employee and employer contribution rates will gradually increase—rising to 3.5% in 2026 and to 4% in 2028—while employees will be provided with the flexibility to temporarily remain at the current 3% rate. To encourage earlier participation, the government will extend its contributions to 16- and 17-year-olds from 1 July 2025, with employer matching for this age group beginning on 1 April 2026. These individuals will need to opt in, as automatic enrolment will continue to apply only from age 18.

At the same time, government contributions will be reduced to 25 cents for every dollar contributed and capped at $260.72 per year. These contributions will also no longer be available to individuals earning over $180,000. The contributions for the current year will remain unchanged, with payments expected in July or August.

Overall, these updates are designed to increase long-term savings while ensuring KiwiSaver remains sustainable and forecasting suggests they will leave people significantly better-off in the long-term.

In the Budget, targeted investments have been made in healthcare, housing support, family assistance and support for the education workforce to address the needs of low- to middle-income families and other key groups. Below is a detailed summary of budget allocations for each sector:

• Healthcare – The maximum prescription length has been extended from 3 to 12 months to reduce medical costs and improve access to long-term medications.
• Housing support – Income thresholds have been raised to enable an additional 66,000 lower-income households (including those with a SuperGold cardholder) to qualify for rates rebates. The government is lifting the threshold at which SuperGold cardholders are eligible to receive rates relief from $31,510 to $45,000.
• Family assistance – The Working for Families abatement threshold has been lifted from $42,700 to $44,900 as the abatement rate raised from 27% to 27.5%. This will see around 142,000 families receive an average of $14 a fortnight. There are also changes to benefits for unemployed young people. 18 and 19-year-olds will now have their Jobseeker and emergency benefits tested against their parents’ incomes. The test will assess whether the young person can reasonably be expected to rely on their parents or guardians for support.
• Education workforce support – Registration and practising certificate fees have been waived for approximately 115,000 teachers through to 2028, saving each teacher up to $550.
• Student loan repayment – The Budget indefinitely freezes the repayment threshold at $24,128 a year – meaning people will start repaying their student loan when they are earning above this amount.
• Radio New Zealand – The national broadcaster will have $4.6 million cut from its annual budget, or $18m over four years. This is to recognise that government-funded media needed to deliver the same efficiency and value as the rest of the public sector.

The Budget places strong emphasis on strengthening New Zealand’s health system. The government is focused on improving access to timely, high-quality healthcare, with particular attention given to hospital services, primary and community care, mental health and aged care. There is also a significant commitment to modernising health infrastructure and expanding access to essential medicines. The overarching goal is to create a more resilient and responsive system that meets the needs of all New Zealanders.

In the education sector, the Budget prioritises lifting student achievement and addressing persistent challenges in engagement and attendance. Support for children with additional learning needs is a central focus, along with strengthening foundational skills like literacy and numeracy. The government is also investing in the quality of learning environments across schools and early learning centres. A shift in resources from lower-impact initiatives to more targeted, evidence-based interventions underscore the drive for better educational outcomes.

Budget 2025 reinforces the government’s commitment to restoring law and order and enhancing community safety. There is a strong focus on supporting frontline policing, improving the efficiency and responsiveness of the justice system and addressing serious and youth offending. Additional support is being directed toward corrections, ensuring the system can manage demand while maintaining security and rehabilitation services. The approach combines investment in enforcement with operational reform and streamlined service delivery.

The Budget’s approach to social services is centred on accountability, targeted support and long-term social investment. Key areas of focus include improving care for vulnerable populations, strengthening disability services and reforming support systems for at-risk communities. Alongside these priorities, substantial system-wide efficiencies are being implemented, including the transformation of welfare delivery and benefit integrity measures. These changes aim to deliver better outcomes while ensuring public resources are used effectively.

In defence and foreign affairs, the Budget reflects a clear strategy to enhance New Zealand’s security and regional engagement. The government is focused on strengthening defence capabilities across land, sea, air and cyber domains, while deepening its development partnerships in the Pacific. These initiatives are aligned with broader national objectives around resilience, sovereignty and global cooperation, supported by reprioritisation within existing budgets to ensure long-term sustainability.

Infrastructure is the backbone of any thriving economy. The Budget bring investments in new and upgraded hospitals, mental health facilities, school buildings and rail and roads across New Zealand. The Budget is expected to provide funding certainty for the capital pipeline, including funding over the forecast period for programmes already in delivery:

• $1 billion investment to upgrade and expand hospitals across the country, including the Nelson Hospital Redevelopment and Wellington Regional Hospital Emergency Department refurbishment, as part of the government’s commitment to ensuring all New Zealanders can access high quality, modern healthcare.
• $712 million capital and $234 million operating for new classrooms and school property maintenance, including funding for approximately 10,000 additional student places.
• $50 million for upgrades to mental health facilities to provide safer, more therapeutic care settings for patients.
• $464 million capital and $141 million operating for rail maintenance to increase the reliability for commuters and freight in the Auckland and Wellington metro areas and to replace ageing bridges, culverts and other assets to ensure goods can get to and from farms, manufacturers and ports.
• 240 new high security beds at Christchurch Men’s Prison, along with a new Health Centre and Intervention and Support Unit containing 52 beds. Phase 1 of the redevelopment will be designed, built, financed and maintained for 25 years under a public private partnership. Corrections will retain responsibility for operations and custodial management of the facility.
• $167 million capital and $43.7 million operating over the forecast period to upgrade Defence infrastructure, along with the previously announced $2 billion plus investment to replace the Defence Force’s ageing maritime helicopter fleet.
• $219 million in additional operating funding to complete recovery works on local roads that were damaged in the 2023 North Island weather events.