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Following yesterday’s Budget 2025 announcement, we wanted to highlight the key tax developments that may impact our clients. Here’s what’s changing: 📌 Investment Boost – 20% Immediate Deduction Effective 22 May 2025, businesses can claim an immediate 20% tax deduction on the cost of qualifying new depreciable assets in the year of acquisition, in addition to standard depreciation on the remaining 80% of the asset's value. Key Points: 👉 Eligible Assets: New assets such as machinery, equipment, vehicles, and commercial buildings. 👉 Exclusions: Land, residential buildings, trading stock, fixed-life intangible assets (e.g., patents), and assets previously used in New Zealand. 👉 No Value Cap: There is no upper limit on the value of eligible investments. 👉 Depreciation Base Adjustment: Standard depreciation applies to the asset's cost after deducting the 20% immediate deduction. 👉 Tax Losses: If the deduction results in a tax loss, it can be carried forward to offset future taxable income. This measure aims to enhance cash flow for businesses, encouraging investment in productive assets. 📌 KiwiSaver Contribution Increases From 1 April 2026, the minimum employee and employer KiwiSaver contribution rates will rise to 3.5%, with a further increase to 4% from 1 April 2028. Employees facing financial hardship can apply to maintain a 3% contribution rate for up to 12 months. 📌 Enhanced Inland Revenue Compliance Efforts An additional $35 million annually has been allocated to Inland Revenue to bolster tax compliance and collection activities, supplementing the existing $27 million funding. This investment aims to yield a return of $4 for every $1 spent in 2025/26, increasing to $8 per $1 in subsequent years. Recent audits have uncovered significant discrepancies, particularly in the property sector, including issues related to GST and the bright-line rule. 📌 Proposed Reforms to Thin Capitalisation Rules The Government has initiated consultation on reforming New Zealand's thin capitalisation rules to better support infrastructure investment. Considerations: 👉 Objective: Attract more foreign investment into New Zealand by potentially relaxing existing thin capitalisation settings. 👉 Options Under Review: Adjusting debt-to-asset ratios or introducing alternative measures to determine allowable interest deductions. As always, if you have any questions or concerns about how these changes could impact you, get in touch for a chat with your usual MCP contact.

Save up to 22% of your annual income with tax-savvy strategies 👇

Save up to 22% of your annual income with tax-savvy strategies 👇

Save up to 22% of your annual income with tax-savvy strategies 👇