The Government’s latest Budget includes a number of tax and compliance changes that will affect New Zealand businesses over the coming years. While there were no major changes to income tax rates, several targeted measures have been introduced to simplify compliance, encourage investment, strengthen tax enforcement, and provide support to working families.
Here’s a summary of the key announcements and what they could mean for your business.
Research & Development Tax Incentive Changes
The Research and Development Tax Incentive (RDTI) scheme is being refined to better target innovation activities while improving cashflow for eligible businesses. The Government has announced:
- More flexibility around RDTI filing deadlines and amendments.
- In-year payments to help businesses access the tax credit sooner.
- Expanded eligibility for some mining-related R&D expenditure.
- A reduction in the cap for non-administrative internal software expenditure from $25 million to $3 million.
For innovative businesses, the changes should improve access to R&D incentives and cashflow support. However, businesses undertaking significant internal software development may need to reassess the extent of expenditure that qualifies for the credit.
Foreign Investment Fund (FIF) Rule Changes
- Increasing the FIF de minimis threshold from $50,000 to $100,000.
- Extending the Revenue Account Method (RAM) for unlisted foreign shares to all New Zealand taxpayers.
- Allowing tax to be paid on realised gains and actual dividends rather than deemed income in certain circumstances.
FBT Changes for Business Vehicles
- Remove the requirement for detailed vehicle logbooks.
- Adopt a more practical “close enough is good enough” approach.
- Reduce compliance costs associated with vehicle monitoring and record keeping.
Many businesses currently spend considerable time maintaining vehicle records to support FBT positions. These changes should make compliance simpler while still ensuring private vehicle use is taxed appropriately. Further details are expected as legislation progresses.
Increased In-Work Tax Credit for Working Families
To help offset rising fuel and living costs, the Government has confirmed a temporary increase to the In-Work Tax Credit. Eligible low-to-middle income working families will receive an additional $50 per week for up to one year.
While this measure is aimed at households rather than businesses directly, it may provide some financial relief for employees and improve household cashflow during a challenging economic period.
Shareholder Loans Under Liquidated Companies
A significant integrity measure has been introduced targeting companies that are liquidated or removed from the Companies Register while still having shareholder loan balances outstanding. Under the proposed rules:
- Outstanding shareholder loans will generally be treated as taxable income six months after a company has been liquidated or removed from the register.
- The measure aims to prevent shareholder loans effectively becoming tax-free distributions.
Business owners should review shareholder current accounts and loan balances well before any company liquidation or restructuring process to avoid unexpected tax consequences.
More Funding for Inland Revenue Compliance Activities
The Government has allocated an additional $15 million per year to Inland Revenue’s compliance and debt collection activities. This follows previous compliance initiatives that have already resulted in substantial collections of overdue tax debt.
- Increased audit and review activity.
- Greater focus on overdue tax debt.
- More active debt recovery and enforcement action.
- Increased scrutiny of high-risk tax positions.
Businesses should ensure their tax filings, GST returns, PAYE obligations and shareholder accounts are up to date and well documented.
Donation Tax Credit Changes
The Government has also announced changes to charitable donation tax credits. Key changes include:
- A cap of $100,000 per year on eligible donations that can qualify for the donation tax credit.
- More flexibility around receiving donation tax credit refunds throughout the year.
- The ability to gift donation tax credits directly to charities in certain circumstances.
For most donors, the cap is unlikely to have any impact. However, individuals making very large charitable donations should review the potential effect on future tax credit claims.
Final Thoughts
This year’s Budget focuses less on broad tax reform and more on simplifying compliance, improving tax system integrity, encouraging investment, and strengthening Inland Revenue’s enforcement capability. For most business owners, the biggest practical impacts are likely to be the simplification of FBT vehicle rules, increased IRD compliance activity, and the new shareholder loan provisions.
How Kiwitax Can Help
At Kiwitax, we’re here to help small business owners across New Zealand make sense of these proposed changes and take proactive steps to plan for what’s ahead.
If you’re an existing client, feel free to reach out to your dedicated accountant to discuss how the 2026 Budget may impact your situation and how you can leverage/accommodate the changes.
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Disclaimer
This article is intended to provide general information only and does not constitute personalised financial or tax advice. Please note that Budget 2026 measures are proposals at this stage and are subject to change until passed into law. We recommend seeking tailored advice from a qualified accountant or tax advisor before making any financial decisions based on these announcements.