Finance Minister Nicola Willis has delivered Budget 2026, and the message is clear: fiscal repair first, spending discipline second, strategic investment where it counts. With a net operating package of just $2.1 billion per year (down from $2.4 billion), this is a tighter Budget than last year’s, shaped by the realities of the Middle East fuel crisis and a weaker near-term economic outlook. The Government has offset $3.8 billion in new spending with $1.7 billion in savings, and Treasury now forecasts a return to surplus in 2028/29, a year earlier than the December update and the first surplus in a decade.
For business owners, there are no headline-grabbing tax incentives this year. For individuals and families, there are no broad tax cuts or threshold changes. This is a Budget focused on getting the books in order while keeping essential services funded. Here is what matters most.
Click here to view our Budget 2026 summary.
What it means for your business
Budget 2026 includes targeted tax measures rather than broad reform. These include simplifying fringe benefit tax (FBT) rules for private motor vehicle use, changes to tax rules for charities and not-for-profits to support the sector and maintain integrity, and changes to tax settings designed to help retain talent and support increased foreign investment in New Zealand.
Our view: The FBT simplification for vehicles is welcome and long overdue. There will no longer be a requirement to keep detailed logbooks. This has been one of the most common areas of confusion for employers, and reducing compliance burden here will save time and cost. If you employ overseas talent or are looking to attract foreign capital, the investment and talent retention measures are worth exploring with your adviser.
“The budget is “eat your meat and three veggies now, and you will get a dessert in the future” Very good to be in a surplus a year earlier.”
Marc Nel — Director / Moore Markhams New Zealand Financial Services Ltd
Donation tax credits will be capped at the lower of $100,000 or the donor’s taxable income. In return, donors will be able to claim credits during the year and direct Inland Revenue to transfer them straight to a charity. For smaller not-for-profits, the tax-free income threshold rises to $10,000, and very small entities will no longer need to file returns. On the integrity side, exemptions for non-resident charities will be repealed, and trusts will need to physically pay distributions to tax-exempt beneficiaries within a set timeframe or face tax at the trustee rate.
Our view: For most charities, the in-year credit transfers could mean a steadier flow of funds rather than waiting for donors to file annual returns. The reduced filing requirements for smaller organisations is a practical win. If your trust structure involves distributions to charitable beneficiaries, review your arrangements now to make sure you’ll meet the new timeframe requirements. Talk to your adviser early.
“While there were earlier murmurings that Inland Revenue might tax membership subscriptions and levies in the not-for-profit space, Budget 2026 explicitly confirms these will remain non-taxable. This is welcome certainty for the sector.”
Andrew Steel — Audit Partner
The Government is proposing to tighten the tax treatment of shareholder loans where a company is removed from the register. Any outstanding loan balance would be deemed repaid six months after deregistration, triggering a taxable income event for the shareholder under the financial arrangement rules. This targets situations where overdrawn shareholder current accounts remain unpaid when a company ceases to exist.
Our view: This is one to pay close attention to. Many owner-operators carry overdrawn current account balances for years, and some have historically allowed those balances to lapse when a company is struck off. Under these proposals, that approach will create a tax bill. If you are planning to wind up or deregister a company, make sure you deal with any outstanding shareholder loans first. Talk to your adviser well before you start the process.
A suite of reforms is proposed to the FIF rules, including expanding the revenue account method (RAM) so that all New Zealand tax residents can use it for unlisted foreign shares, meaning tax is based on realised gains and actual dividends rather than deemed income. The package also increases the de minimis threshold to $100,000, extends access to RAM for listed shares for certain taxpayers facing double taxation, and allows continued use of the attributable FIF income method in specific cases.
Our view: The increase in the de minimis threshold from $50,000 to $100,000 is the headline here. If you hold modest overseas investments, you may no longer need to deal with the FIF rules at all. For those with larger offshore portfolios, the expanded access to RAM is a meaningful simplification, being taxed on what you actually receive rather than deemed income is fairer and easier to manage. If you have overseas shares, now is a good time to review your position with your adviser to understand how these changes affect your obligations from 1 April 2027.
Proposed changes to the non-resident contractors’ tax (NRCT) rules aim to reduce compliance costs and make it easier for businesses to work with overseas contractors. The exemption threshold would increase from $15,000 to $75,000, meaning smaller contracts would no longer require withholding tax. A new “single-payer” approach would allow New Zealand businesses to consider only their own payments to a contractor rather than the contractor’s total New Zealand income. Certain low-risk entities such as branches or partnerships that meet compliance standards would also be excluded from NRCT. These changes are expected to apply from 1 April 2027.
Our view: If you regularly engage overseas contractors or consultants, this is a welcome reduction in compliance burden. The jump from $15,000 to $75,000 is significant and will take many short-term or project-based engagements out of the withholding regime entirely. The single-payer approach is also a practical fix, under the current rules, businesses are technically required to consider a contractor’s total New Zealand income, which is often impossible to verify. These changes should make it simpler and cheaper to bring in specialist expertise from overseas.
The Government is proposing changes to the Research and Development Tax Incentive (RDTI) to better support innovation and ensure the scheme is efficient and well targeted. The cap on eligible internal software development expenditure would be reduced from $25 million to $3 million per year. Mining businesses would be able to claim a wider range of R&D costs. Businesses would also gain more administrative flexibility, with Inland Revenue given greater discretion to accept late filings and fix minor errors in RDTI claims. The changes are expected to apply from the 2027–2028 tax year.
Our view: The reduction in the software development cap is the most significant change here. If your business currently claims more than $3 million in internal software R&D, this will directly reduce your eligible expenditure. For most businesses claiming the RDTI, the impact will be minimal, but the administrative flexibility around late filings and error correction is a genuine improvement. The scheme has been criticised for being too rigid, and these changes should make it more practical to use. If you are in mining or resource extraction, the expanded eligibility is worth exploring with your adviser.
There are no personal income tax cuts in this Budget. PAYE thresholds remain frozen, meaning fiscal drag continues. If your employees receive a pay rise that tracks inflation, more of their income is pushed into higher tax brackets, effectively increasing their real tax rate without any change in legislation.
Our view: For employers, this means your team’s take-home pay is not stretching as far as it should. That has flow-on effects for retention, morale and wage negotiation. If you are reviewing remuneration packages, consider the full picture, including KiwiSaver employer contributions (which stepped up to 3.5% or 4% from 1 April 2026), FBT-exempt benefits, and other non-cash support that can add value without triggering additional tax.
The Government is introducing a prudential levy on banks, non-bank deposit takers, insurers and financial market infrastructure providers. The levy is designed to recover the cost of regulation and supervision by the Reserve Bank, and is expected to bring in around $209 million over four years, starting from mid-2027.
The Government says this is consistent with international practice in countries like Australia, Canada and the United Kingdom. The Reserve Bank will consult with the sector before the levy is introduced, with Cabinet decisions expected in early 2027.
Our view: If you operate in financial services, this is a new compliance cost to plan for. The levy amounts are modest relative to sector profits, but the principle matters: the cost of financial regulation is shifting from the taxpayer to the industry. We expect further detail on how the levy will be apportioned across different types of institutions, and we will be watching the consultation closely on behalf of our clients in this space.
We will also be reviewing how these increased costs are passed through by banks, and what this could mean for your financing and operational expenses.
The Government is cutting approximately 8,700 public sector roles over three years (around 14 per cent of the current workforce), with most reductions achieved through attrition. Government agencies face a 2 per cent baseline cut in 2026/27, followed by two further rounds of 5 per cent cuts, totalling roughly 12 per cent. This is expected to deliver $2.4 billion in savings.
Our view: If your business supplies goods or services to government, this signals a tighter procurement environment ahead. Contracts may be renegotiated, timelines extended or scoped down. For businesses in the private sector more broadly, the restructuring could also mean an influx of experienced professionals into the job market over the next two to three years, which may ease some of the skills shortages many sectors have been experiencing.
Budget 2026 includes $5.7 billion in net new capital spending, with significant allocations across transport, health, education and defence. Highlights include $1.77 billion for the Waikato Expressway extension from Cambridge to Piarere, $1.075 billion for KiwiRail’s network from 2027 to 2030, $680 million in health infrastructure capital (including a new 158-bed ward at Whangārei Hospital and land purchases for the planned Drury hospital), and $2.3 billion in defence capital spending.
A new Incentives for Growth Fund of $400 million over four years will reward councils that consent more homes by funding the infrastructure (roads, pipes, services) needed to support new housing developments.
Our view: This is a substantial capital programme, and it will create work across construction, engineering, transport and professional services. If your business operates in these sectors, or supplies into them, now is the time to review your capacity and pipeline. The council housing incentive is also worth watching. It could shift development patterns in your region, particularly if your local council moves quickly to take advantage of the fund. “Getting rail back on track is a good move with $705 million capital and $477 million operating fund to renew and upgrade New Zealand’s rail network announced in today’s budget. This will give NZ more transport options, increasing resilience and sustainability across the Motu.”
Lena Ripley — Director
The fees-free university scheme has been scrapped, with savings of approximately $1 billion over four years redirected towards vocational and trades education. Budget 2026 allocates $69 million to double the number of secondary students attending Trades Academies to 20,000 by 2030, and provides $284 million for additional student places this year and next.
Our view: If you employ apprentices or trade workers, this shift in funding priorities is positive. A stronger pipeline of trade-trained school leavers should help ease the skills shortage that many of our clients in construction, manufacturing and agriculture continue to face. We encourage employers to engage with their local Trades Academies and industry training organisations to make the most of this investment.
The Budget sets aside $450 million as a contingency reserve for fuel-related disruptions, alongside additional funding for frontline agencies (FENZ, Police, Corrections, Customs, Education) to manage the impact of sustained fuel price increases. A loan guarantee scheme and changes to the Gas Act will support businesses that rely on gas as they adapt to changes in the energy market.
Our view: If your business is exposed to energy costs, particularly in manufacturing, transport or agriculture, the loan guarantee scheme and Gas Act changes may offer practical support. Talk to your adviser about whether you qualify and how to factor energy risk into your forward planning.
“This is a steady, no surprises Budget, and given the times we are in, that’s not a bad thing. The Government has put most of its efforts into getting the books back in order and heading for surplus by 2028/29, rather than into tax cuts or big spending. For the average business or household, not a lot of changes day to day. The real takeaway for us is that you can’t sit back and wait for the Budget to do the work for you. Keep a close eye on your cashflow, plan ahead, and you will be in good shape whatever the economy throws at you.”
Mike Ansett — Associate DirectorWhat it means for you and your family
There are no sweeping cost-of-living measures in this Budget. The temporary $50-per-week boost to the in-work tax credit (IWTC), which took effect on 1 April 2026, remains in place for qualifying families. The Government has also allocated $43 million to upgrade the SuperGold card so it can be used as an official form of identification.
Our view: If you are eligible for the IWTC increase, make sure you are claiming it. The boost applies to families earning up to around $44,900 (for the full amount), phasing out at higher income levels depending on the number of children. If you are not sure whether you qualify, check with Inland Revenue or speak to your adviser. The SuperGold card upgrade is a practical change for older New Zealanders who may not hold a current driver licence or passport.
“From a tax perspective, the absence of new taxes will provide some welcome stability for businesses. However, the lack of tax cuts or meaningful new incentives will be disappointing for many, particularly given the ongoing cost-of-living pressures and increasing operating costs. There will be some changes to FBT which is positive to see to reduce the compliance burden in that area, but tax incentives aimed at encouraging growth and investment have largely been missed.”
Belinda Young — Director
Health is the single largest area of new spending in Budget 2026, receiving $5.8 billion in total. This includes a $5.5 billion increase to frontline health services over four years, $34 million for funded three-day postnatal stays, $33 million to extend bowel screening eligibility from age 58 to 56, $15.5 million for paediatric palliative care, and $930 million for new clinical equipment, technology upgrades and facility improvements nationwide.
Our view: These are meaningful investments in health services that affect everyday life. The extension of bowel screening eligibility is a practical, evidence-based step. The postnatal stays funding addresses a gap that has been raised repeatedly by the sector. For communities near the hospital builds (Whangārei, Tauranga, Hawke’s Bay, Palmerston North, Drury), this is long-awaited progress.
Contributions to the New Zealand Superannuation Fund will rise to $3.1 billion over the next four years, which is $2.2 billion more than previously expected. This reflects revised population projections, higher inflation, and a lower long-run return assumption from the Guardians of NZ Superannuation.
Our view: This is a long-term signal worth paying attention to. The increasing cost of NZ Superannuation, driven by an ageing population, is one of the structural fiscal pressures the Government faces. While there are no changes to NZ Super entitlements in this Budget, the rising contribution profile is a reminder that retirement planning is something to stay on top of, both personally and within your business.
The Government is proposing changes to the financial arrangement rules, allowing some taxpayers to calculate income in foreign currency, introducing protection against double taxation, creating special rules for Active Investor Plus visa holders, and excluding low-risk personal foreign currency items (like overseas bank accounts or mortgages) from the regime. The changes are aimed at individuals and are particularly helpful for migrants or people with overseas investments, reducing unexpected taxable gains or losses arising from exchange rate fluctuations. The changes are expected to apply from 1 April 2027.
Our view: If you have moved to New Zealand from overseas and still hold a foreign mortgage or bank account, you may have been caught out by tax on exchange rate movements that had nothing to do with a real economic gain. These changes address that problem directly. They also make New Zealand a more attractive destination for skilled migrants and investors, which aligns with the broader talent retention settings in this Budget.
Budget 2026 provides $131 million for literacy and numeracy initiatives in primary and intermediate schools, $240 million for new school curriculums and secondary school qualifications, a 2 per cent increase in school operations grants and a 1.5 per cent rise in early childhood subsidies from July (six months earlier than usual). The Healthy School Lunches programme receives $212 million for 2027.
Our view: The focus on reading, writing and maths fundamentals is a positive step. For families, the earlier increase in early childhood subsidies and the continuation of school lunches will provide some immediate practical support.
The bigger picture
Budget 2026 is a disciplined, restrained Budget delivered against a backdrop of global uncertainty. Treasury forecasts GDP growth of 1.2 per cent this year (down from earlier forecasts due to the fuel crisis), rebounding to 2.3 per cent in 2027 and 3.2 per cent in 2028. More than 220,000 jobs are expected to be created over the forecast period, and the deficit is forecast to more than halve in 2027/28 before reaching a $2.6 billion surplus in 2028/29.
Net core Crown debt is forecast to peak at 46.1 per cent of GDP in 2028 before falling, and the Government’s borrowing programme is expected to decrease by $6 billion between 2028 and 2030.
There are no bold election-year giveaways here. This is a Budget built on the premise that steady, responsible fiscal management will deliver better outcomes over time. Whether that approach is enough to address the cost-of-living pressures and productivity challenges New Zealand faces is a question that will play out over the months ahead.
At Moore Markhams, we are already working with clients to understand what these changes mean in practice. Whether you are planning capital investment, reviewing your workforce costs, navigating housing support changes, or simply want to know how the Budget affects your tax position, we are here to help you work through it.
Helping you thrive in a changing world remains our purpose.
