NZ Budget 2025: what it means for businesses

On 22 May 2025, the New Zealand Government announced Budget 2025, outlining key funding decisions that may affect many small and medium-sized businesses in New Zealand. From a $1.66 billion tax incentive for businesses to KiwiSaver changes, there’s a host of announcements that businesses should be aware of. 

We’ve broken down the key budget areas that matter most to businesses in New Zealand, with clear, practical tips to help you stay ahead. 

Disclaimer: The information in this article is current as at 23 May 2025, and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related bodies corporate (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. The Information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising either directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and to seek professional advice before making any decisions or relying on the information in this article.

Budget inclusions businesses should know about

Introduction of ‘Investment Boost’

Budget 2025 introduces the ‘Investment Boost’, a $1.66 billion tax incentive designed to encourage business investment in productive assets such as machinery, tools, and equipment. Eligible businesses will be able to deduct 20% of a new asset’s value from their taxable income in the year of purchase, in addition to standard depreciation.

This could help businesses lower their tax bills and free up cash for growth. Employers should review any upcoming asset purchases and consult their accountant or tax advisor to make the most of this opportunity.

Big changes to KiwiSaver

Budget 2025 introduces significant KiwiSaver changes that will affect payroll and employee contributions. The default employer and employee contribution rates will increase from 3% to 4% in two steps, rising to 3.5% on 1 April 2026, and 4% on 1 April 2028. While employees can opt to stay at 3%, employers must still match this if the employee chooses the lower rate.

Employers will also need to prepare for new obligations from 1 April 2026, including matching contributions for 16 and 17-year-olds. Payroll systems and employment agreements may need updating to reflect the changes. Business owners should review their payroll processes, budget for the higher contribution rates, and communicate upcoming changes to employees early to ensure a smooth transition.

$10 million to defer tax liability for some employee share schemes 

Budget 2025 allocates $10 million to defer tax liability of some employee share schemes to help startups and unlisted companies.

If employers offer, or plan to offer, shares to employees, they will need to update payroll systems to handle the new tax treatment. It’s also important to review employment contracts and communication materials so employees understand the new options clearly and what they need to do. 

Infrastructure investment boost

Budget 2025 sets aside $75 million over the next four years to attract international investment into New Zealand’s infrastructure sector. Proposed changes to the country’s thin capitalisation rules – currently limiting the amount of tax-deductible debt foreign investors can allocate to New Zealand – are aimed at making it easier for overseas capital to flow into large-scale projects. This could accelerate the rollout of major infrastructure developments and create more subcontracting and supply opportunities for local businesses.

At the same time, the government is continuing to build the National Infrastructure Pipeline, which outlines more than 7,500 infrastructure projects valued at over $204 billion. For businesses operating in construction, trades, professional services, and logistics, this pipeline presents a valuable opportunity to tap into upcoming work, form partnerships, or scale operations to meet new demand.

$577 million invested into film industry 

$577 million over five years has been allocated to support the International Screen Production Rebate, bringing total funding to $1.09 billion to sustain the film and TV industry. The rebate offers 20% cash back on qualifying production costs, with an additional 5% for larger productions, aiming to attract international projects and create around 24,000 jobs.

This incentive may boost activity for businesses who operate in sectors who support the film industry, such as catering, logistics, and hospitality.
For businesses that operate in these industries, it may mean preparing to scale quickly if it becomes necessary.

Social investment fund opportunities

Budget 2025 introduces a $190 million Social Investment Fund to support initiatives in training, employment, and social services, offering new revenue opportunities for businesses in these sectors.

For business in these sectors, this fund could be an opportunity for new revenue and it would be a good idea to monitor application windows.

Potential impact from public sector budget cuts

The Government has lowered the operating allowance for the 2025 Budget from a forecasted $2.4 billion to $1.3 billion, which will mean less opportunities for funding across the public sector. 

While this most directly affects government departments, businesses that work with the public sector, either through contracts or services, may notice reduced demand for their services.
HR and payroll teams should be ready to manage any changes to roles or workloads, with potential impacts becoming more noticeable by late 2025.

Other budget updates 

Some of the Government’s big-ticket spending areas tend to focus on the public sector, and while they may not directly impact businesses, they’re worth knowing about. That includes over $1 billion for health, $734 million for education, $1 billion for defence, plus investments in social services, law and order and cost of living funding for low income households. 

You can find detailed information about the full budget on the Budget 2025 website.

Budget and beyond: Employment Hero helps you navigate it all 

Running a business is hard enough as it is – let alone keeping up with the Budget and how it might affect you. 

Thankfully, Employment Hero is here to help employers like you navigate not just the 2025 Budget, but the recent wage theft announcement, HR compliance, and so much more. 

In fact, Our Employment Operating System is built with these concerns and more in mind. The Employment Operating System really does it all: it’s one system, covering all your employment needs – that’s payroll, recruitment, employment law and more. And the best part? Each feature syncs up seamlessly with the other, so you don’t need to double up on those time-consuming admin and data entry tasks. 

If you’re ready to make employment easy, book a demo to get started.