The government delivered the much-anticipated 2025 Budget on 22 May, but as seems to be the case these days, many of the major announcements had been preempted in the days leading up to the official presentation.
The Budget contained several new spending initiatives and tax adjustments, which are largely funded by cuts to preexisting government programs and, controversially, by adjustments to the planned pay equity regime.
If we look at the budget from a business perspective, the biggest headline was the immediate introduction of the Investment Boost scheme, which will allow businesses to immediately deduct 20% of the cost of new assets, as well as claiming depreciation on the remaining 80% in the normal manner. There is no cap on the level of capital expenditure and the scope of assets included is quite broad, although it does only apply to new or newly imported equipment assets. This is positive for businesses as an increased depreciation claim means lower taxable income and therefore less tax to pay. However, it’s important to note that generally this allows no more expenses to be claimed than under the old regime, it’s just an acceleration of the claim.
The other major announcement effecting businesses was the changes to KiwiSaver, with an increase in employer contributions to 4% to be phased in from next year. Employees can still opt to keep their contributions at 3% if they choose. In addition, the government will halve its annual contribution to $260.72 and will stop contributing for those earning $180,000 or more a year.
It’s also important to note that the eligibility for KiwiSaver has now been extended to 16- and 17-year-olds who will receive both employer and government contributions, so it may be worthwhile encouraging family members to begin their savings early, with a view to building their KiwiSaver balance to assist with buying their first house.
Under the banner of social welfare, there were many significant changes, including that eligible families will receive an increase in Working for Families payments, while medical prescriptions can be annualised if appropriate, rather than limited to 3 months. A controversial change in this area was to limit access to Job Seeker Support and Emergency Benefits for 18- and 19-year-olds. From July 2027, people in that age bracket can no longer automatically receive a benefit if not in further education, employment or training, and instead a parental assistance test will be introduced, and any benefit will be subject to means testing.
All in all, this felt like a reasonably restrained budget, and other than the change to the pay equity process, there were no particularly controversial announcements.
