Budget 2025: What's in it for business?

The Coalition Government’s second Budget has landed, attempting to strike a balance between responsible spending and investment in business growth.

The Government has identified $21 billion of savings over the next 4 years, reinvesting them into health, education, defence, law and order – and a flagship policy for business: a $1.7 billion a year package known as ‘Investment Boost’.

The new scheme will incentivise capital investment by allowing businesses to claim tax deductions up front when purchasing new assets. The 20% deduction will apply on top of normal depreciation, giving businesses a strong incentive to bring forward productive investment. This is a positive move for business – and it’s available right away.

The other major change for business regards adjustments to KiwiSaver. From April next year, the minimum employer and employee contributions will increase to 3.5% – with a further increase to 4% in April 2028.

Here’s what else you need to know.

Investment Boost incentives for productivity and growth

The centerpiece of Budget 2025 is the establishment of the ‘Investment Boost’ tax incentive. The Prime Minister had dropped several hints about his interest in exploring tax relief for high expenditure firms, and this package is the result.

Investment Boost will allow for 20% of the cost of new assets such as machinery, tools and equipment to be deducted immediately from taxable income (on top of normal depreciation). This deduction will also include commercial buildings. With no cap on the value of eligible investments, nor the size of business, the policy is expected to cost an average of $1.7 billion per year in reduced revenue, but is expected to increase overall GDP by 1% and wages by 1.5% over the course of the next 20 years.

This move, along with the continuance of the R&D Tax Incentive (which will remain unchanged) is a welcome step to support businesses and overall productivity.

For more information on the ‘Investment Boost’ click here: Investment Boost: Tax Incentive to Lift Growth | Beehive.govt.nz

KiwiSaver changes will impact on employers and employees

For the first time in many years, the Government is making significant changes to KiwiSaver, aiming to increase retirement savings by raising the minimum contribution rate.

The default rate for KiwiSaver contributions will rise from 3% to 3.5% from April next year – for both employers and employees. Contributions will then rise again to 4% two years later, in April 2028.

Employees will also have the option to opt out of the increased contributions (and remain at 3%).

The Government is also bringing 16 and 17-year-olds into the KiwiSaver scheme.

Government contributions will be halved for all workers – and for the first time, they will be means tested, with no Government contributions for those who earn more than $180,000 a year.

The Government’s phased approach provides time to plan, but will have cost implications for business.

Over time, these changes will deliver a more sustainable retirement system, and KiwiSaver funds will also have more money to invest in the growth of New Zealand firms.

But a broader review of superannuation remains a pressing issue – one the Government should address in the coming years.

Economic outlook

The economic outlook has deteriorated since Treasury’s last forecast in December, leaving the country facing a larger deficit and higher levels of debt.

But conditions are forecast to improve relatively quickly, with growth nearing 3% next year – and a track for the country to return to surplus by 2029.

Key Points

Economic activity (GDP) is expected to increase from -0.8% in the year to June 2025 to 2.9% in 2026 and stabilise at around 2.9% in the outyears to 2029.
Inflationary pressures are expected to slightly decline from 2.2% in the year to June 2025 to around 2% in the outyears to 2029.
Unemployment is expected to decline slightly from 5.4% in the year to June 2025 to reach 4.3% in the year ended June 2029.
Net Core Crown debt will increase from $185 billion (42.7% of GDP) in the year ending June 2025 to $238 billion (45.5% of GDP) in the year ending 2029. Current debt levels as a percentage of GDP have more than doubled over the past 5 years.
The current operating balance of $5.5 billion (deficit) for the year ended June 2025 is expected to generally improve over the forecast period with a slight surplus expected by 2029.

Of the $6.7 billion in new spending this year, $5.3 billion is provided through savings, the majority of which comes from changes to pay equity and KiwiSaver.

Overall, these figures paint an optimistic picture – though the global environment remains uncertain, and future spending will remain tight unless significant expenditure savings are found.

For further information on the overall fiscal situation, find the Budget Policy Statement for 2025 here: Budget Policy Statement 2025 | The Treasury New Zealand

Other announcements of note

The restraint exercised in this year’s Budget means no “lolly scramble” of policies or spending. But a number of other announcements were made aimed at boosting business growth.

These include:

Investing in infrastructure for all New Zealanders | Beehive.govt.nz

Budget 2025 provides certainty for the capital pipeline for infrastructure investment.
$464 million capital and $141 million operating for rail maintenance for Auckland and Wellington metro areas, for both commercial and commuters.
$219 million in additional operating funding to complete recovery works on local roads that were damaged in the 2023 North Island weather events.

Growth-promoting science and innovation backed | Beehive.govt.nz

Reprioritising funding to support the establishment of refocused Public Research Organisations (PROs).
$23 million to establish a dedicated gene technology regulator.
$5.8 million to establish and operate the Prime Ministers Science, Innovation and Technology Advisory Council.
While not a release, it is worth noting that the Government has allocated around $21 million for the establishment of Invest New Zealand, the new foreign direct investment agency.

$200m set aside for Crown stake in new gas fields | Beehive.govt.nz

The Government has allocated tagged contingency of $200 million over four years for co-investment in new gas fields.
Subject to Cabinet consideration, this signals a willingness for the Crown to take a commercial stake of up to 10-15% in new gas field developments.

Overall, this Budget walks a difficult line between getting the books back in order and supporting economic growth.

We’ll continue to break down the Budget in the days and weeks ahead. If you have any thoughts or questions, please get in touch with our advocacy team.