Tax Changes New Zealand’s 2025: Save Money and Plan Smart

Byadmin

New Zealand’s tax system got a big update in 2025, impacting your paycheck, business finances, and family support. These changes include new personal income tax thresholds, the Investment Boost deduction for businesses, the removal of depreciation deductions for buildings, and updates to the FamilyBoost tax credit. This guide explains each change, shows how it affects you, and offers tips to make the most of these updates. Whether you’re an employee, sole trader, or parent, here’s what you need to know.

Tax Changes

Why These Tax Changes Matter

The government aims to ease financial pressure and boost the economy. New tax thresholds put more money in your pocket. The Investment Boost encourages businesses to grow, creating jobs. FamilyBoost supports whānau with childcare costs. However, the end of building depreciation may raise costs for property owners. These changes balance support for individuals, families, and businesses while funding government services.

New Personal Income Tax Thresholds

New Zealand’s tax system is progressive, meaning higher earners pay a higher tax rate. New thresholds, effective from 31 July 2024 and fully applied from 1 April 2025, reduce taxes for most people earning over $14,000.

What Changed?

  • Old Thresholds (before 31 July 2024):
    • 10.5% for $0–$14,000
    • 17.5% for $14,001–$48,000
    • 30% for $48,001–$70,000
    • 33% for $70,001–$180,000
    • 39% for over $180,000
  • New Thresholds (from 1 April 2025):
    • 10.5% for $0–$15,600
    • 17.5% for $15,601–$53,500
    • 30% for $53,501–$78,100
    • 33% for $78,101–$180,000
    • 39% for over $180,000
  • For 2024/25, composite rates applied due to the mid-year change, blending old and new rates.

How It Affects You

  • Earners above $14,000 see tax savings.
  • Higher earners benefit more due to wider tax brackets.
  • Update your tax code (e.g., M for main income, SB for secondary income) to avoid overpaying.

Examples

IncomeOld Tax (Before 31 July 2024)New Tax (From 1 April 2025)Savings
$50,000$1,470 (10.5% on $14,000) + $5,950 (17.5% on $34,000) + $600 (30% on $2,000) = $8,020$1,638 (10.5% on $15,600) + $6,020 (17.5% on $34,400) = $7,658$362/year
$80,000$1,470 + $5,950 + $6,600 (30% on $22,000) + $3,300 (33% on $10,000) = $17,320$1,638 + $6,632.50 (17.5% on $37,900) + $7,350 (30% on $24,500) + $627 (33% on $1,900) = $16,247.50$1,072.50/year

Tips

  • Use Inland Revenue’s tax calculator to estimate your take-home pay: Inland Revenue Tax Calculator.
  • Check your tax code with the Inland Revenue tax code finder.
  • Adjust payroll software for composite rates if you’re an employer.

Investment Boost Deduction

The Investment Boost, introduced in Budget 2025, encourages businesses to invest in growth. It’s a game-changer for sole traders and companies.

What Changed?

  • From 22 May 2025, businesses can deduct 20% of the cost of new assets in the year of purchase.
  • Eligible assets include:
    • Machinery, tools, equipment
    • Vehicles
    • Technology
    • New non-residential buildings
    • Capital improvements (e.g., seismic strengthening)
  • No limit on asset value, and the deduction is on top of normal depreciation.

How It Affects Businesses

  • Reduces taxable income, improving cash flow.
  • Encourages investment, potentially boosting jobs and wages.
  • Expected to lift GDP by 1% and wages by 1.5% over 20 years.

Example

  • A business buys a $75,000 truck on 23 May 2025.
    • Deduction: 20% of $75,000 = $15,000
    • Claim $15,000 in the 2025 tax return, plus depreciate the remaining $60,000.
    • If the business is in the 28% tax bracket, this saves $4,200 in taxes ($15,000 × 28%).

Tips

  • Record the deduction in your Financial Statements Summary (IR10) like depreciation.
  • Consult a tax advisor to identify eligible assets.
  • Check Inland Revenue’s guide: Claiming Investment Boost.

Building Depreciation Deductions

The rules for depreciating commercial buildings changed, affecting property owners’ tax bills.

What Changed?

  • From 1 April 2024, the depreciation rate for commercial buildings (50+ years useful life) is 0%.
  • No deductions can be claimed for these buildings in the 2024/25 income year.
  • Exceptions:
    • Commercial fit-outs (e.g., office interiors) remain deductible.
    • Certain special buildings may qualify, but details are limited.

How It Affects Businesses

  • Increases taxable income for property owners, as depreciation no longer reduces taxes.
  • Simplifies tax calculations but may raise costs.
  • Inland Revenue estimates this will generate $2.31 billion in tax revenue from 2024/25 to 2027/28.

Example

  • A business owns a $1,000,000 commercial building bought in 2020.
    • Before 2024, it could claim 2% depreciation yearly ($20,000).
    • From 1 April 2024, no depreciation is allowed on the building.
    • Fit-outs, like a $50,000 office renovation, can still be depreciated.

Tips

  • Focus on claiming depreciation for fit-outs and other assets.
  • Review tax strategies with an accountant to offset increased taxable income.
  • See Inland Revenue’s guidance: Claiming Depreciation.

FamilyBoost Tax Credit

FamilyBoost helps families cover early childhood education (ECE) costs, with recent extensions and proposed changes.

What Changed?

  • For the quarter ending 30 September 2024, the filing deadline for FamilyBoost claims was extended to 31 March 2025.
  • Proposed changes (effective July–September 2025, if passed) include:
    • Higher maximum refund amount.
    • Increased income threshold for eligibility.

Eligibility

  • Be a New Zealand tax resident.
  • Have children in licensed ECE services.
  • Household income below $180,000 (credit fully abates above this).

How to Claim

  • Claim quarterly, up to 25% of ECE fees, max $975 per quarter.
  • Refunds are paid directly to your bank account.
  • Apply through Inland Revenue: Working for Families.

Example

  • A family pays $1,000 in ECE fees for a quarter.
    • FamilyBoost credit: 25% of $1,000 = $250
    • They receive $250 as a refund.

Tips

  • File by 31 March 2025 for the September 2024 quarter.
  • Stay updated on proposed changes via Inland Revenue’s Tax Policy website.
  • Estimate payments with Inland Revenue’s calculator: Working for Families Calculator.

What These Changes Mean for You

  • Employees: More take-home pay due to lower taxes. Update your tax code to maximize savings.
  • Sole Traders/Businesses: Use the Investment Boost to invest in growth. Adjust for higher taxes from building depreciation changes.
  • Families: Claim FamilyBoost to ease childcare costs. Watch for updates on income thresholds and refunds.

Next Steps

  • Use Inland Revenue’s tools to calculate your tax savings or deductions.
  • Consult a tax advisor for personalized advice, especially for businesses.
  • Follow updates on FamilyBoost legislation at Inland Revenue.
  • Share this guide with whānau or colleagues to help them save money.

Final Thoughts

New Zealand’s 2025 tax changes offer opportunities to save money and grow businesses. The new tax thresholds put more cash in your pocket. The Investment Boost fuels business investment. FamilyBoost supports families with young kids. While the end of building depreciation may increase costs, smart planning can offset this. Stay informed and act now to make the most of these changes.