While the headlines focus on politics and policy, at Pathfinder we’re focused on what this means for you: your business, your wealth, and your future. We cut through the noise and give you what you actually need: real-world implications and strategic takeaways.
What’s the real story?
New Zealand is coming out of a tough economic cycle. Inflation, interest rates, low productivity and a high-spend hangover have left the Government with little room to move. Budget 2025 doesn’t offer handouts or surprises. Instead, it lays down a challenge: grow smarter, invest strategically, and do more with less.
We’re seeing early signs of recovery — GDP is rising again, but slowly. Productivity is flatlining, and debt has ballooned from $50B to nearly $200B since COVID. In that context, the Budget’s focus isn’t to change everything — it’s to stabilise the books and lay groundwork for long-term growth. That’s exactly what business owners, investors, and families are already trying to do. The Budget simply confirms: the work you’re already doing to plan, prioritise, and think ahead is more important than ever.
What should you be thinking about?
1. Business Investment: Time to Act The new 20% up-front tax deduction (on top of normal depreciation) for eligible asset purchases from 22 May 2025 is significant. If you’re planning to upgrade tools, plant, equipment or commercial buildings — including seismic strengthening — the Government is effectively helping you fund it.
Think: The 20% deduction makes capex investment easier – consider also affordability for the business in what are still uncertain times. The business case for the investment in assets is still as important as it was before the deduction. And when you sell an asset, the 20% deduction will be included for depreciation recovered purposes.
2. KiwiSaver: Budget for It Employer and employee contribution rates are stepping up from 3% to 4%, phased in over three years — 3.5% from 1 April 2026 and 4% from 1 April 2028. The Government’s contribution is also being halved to $260.72 annually, and removed entirely for those earning over $180k from 1 July 2025. Contributions are now extended to 16 and 17-year-olds from 1 July 2025 too.
Think: How will this impact your payroll forecasting? Are your personal contributions being optimised? You’ll need to factor this into future salary discussions or employee planning, and if employing 16 and 17-year olds, Kiwisaver will be a new cost to be factored into your budgets and pricing.
3. Infrastructure & Productivity: A National Focus, Local Impact Budget 2025 is heavy on infrastructure and light on talk. That means it’s aiming for long-term lift in productivity (which New Zealand desperately needs), with $1B for hospitals, $700M+ for new schools and classrooms, rail upgrades, and energy resilience projects like gas field co-investment. Improved infrastructure can reduce business disruption, ease logistics, and improve access to skilled workers — especially in growing regions. Better transport and upgraded hospitals also contribute to people wellbeing and community confidence.
Think: Could new infrastructure near you affect customer access, people recruitment, or supplier logistics? In terms of your strategic planning, should you be reconsidering your location or service footprint to take advantage of this investment? Could better infrastructure unlock new customers, suppliers or team talent? And if so, how would you attract them to your business?
4. Cost of Living: Adjusting the Levers Support is targeted — not universal. Working for Families gets an adjustment to thresholds and abatement rates (benefiting eligible families by an average $14 a fortnight), SuperGold cardholders get help with rates, and the cost of prescriptions drops.
Think: Do the Budget’s new supports for lower-income households — like increased Working for Families and cheaper prescriptions — change how you support your team in terms of any benefits you offer them? Are those benefits still relevant in light of these budget changes? It’s a good time to review benefits and potentially point them in a different direction that’s not funded to improve their value for your team.
5. Other Budget Shifts That Could Affect You
- Inland Revenue gets $35M/year to increase tax compliance and collection — this means increased focus on audits, tax investigations, and enforcement. Ensure your tax affairs are well-documented and up to date, especially around deductions, business expenses, and GST. It’s a good time to proactively review and get advice on areas of risk or concern, and consider taking out Audit Shield if you aren’t already a part of our firm’s policy.
- Childcare centre funding is only increasing by 0.5% – disappointing given the increase won’t cover the costs of inflation. Centres will need to think through carefully what their policies are around pay increases over and above their level of pay parity – for many centres, the funding doesn’t cover the full cost of salaries so higher parent fees are an inevitable outcome.
- Foodbanks get $15M for extended support — a sign that many households are still under financial stress, which flows on to impact initially B2C businesses, and ultimately impacting B2B businesses as well.
- JobSeeker tightened for 18- and 19-year-olds — a parental income test will apply from July 2027, meaning eligibility will be restricted if parents earn above a threshold. This signals a shift in the Government’s expectations: support for young people is being seen as the responsibility of families, not the Government. For employers, this may mean more young people entering the workforce sooner, potentially changing recruitment dynamics and increasing the number of young people available for work.
- Best Start tax credit will be means-tested from next year for house hold incomes over $79k and cut off at $97k – this could impact families with young children who will receive less support. For employers, this may influence parental leave planning, with some team members delaying their return to work or seeking part-time hours to manage their household income levels. Be prepared for more conversations around flexibility and support.
- Social housing receives significant funding boosts — including $128M to build 550 new homes in Auckland and an $82M advance to community housing providers to fast-track delivery. A new $250M capital fund aims to deliver up to 900 more homes in the coming years. This could open new opportunities to contract, subcontract, or support the delivery of social housing. It also signals future demand for maintenance, supply, and fit-out work. If you’re in a support industry, it’s worth watching where these projects land geographically — they could shift local workforce, housing, or customer dynamics. While this may present new contract or partnership opportunities, it could also increase competition for employees, so it’s worth considering your recruitment and retention strategies.
This Budget won’t change your life — but it could shape your decisions
If you understand the rules of the game, you can make them work for you. Budget 2025 is all about doing more with less. And that’s exactly what strategic businesses and investors are already doing.
The 20% deduction isn’t just a tax break — it’s a nudge to modernise, digitise, and build capability. KiwiSaver changes aren’t just payroll costs — they’re part of a longer-term capital story to encourage saving. And the Budget’s restraint isn’t stinginess — it’s an effort to avoid handing the bill to future generations, something I am grateful for as a parent, and something we all have to do – manage our earnings against our outgoings to live within our means.
Whether it’s upgrading assets, revisiting your KiwiSaver settings, or planning for growth, now’s a good time to take stock.
Need help unpacking what this means for you?
Let’s talk. No jargon, no waffle – just a focused conversation about how Budget 2025 affects your business, your finances, and your future.
Pathfinder Solutions – Clarity. Confidence. Strategy.
Pathfinder Solutions advisory team members have either owned or managed businesses, or are investors themselves, so we know first-hand the challenges you face in your world.
Sure we’re Accountants, but the best solutions in business come from focusing on more than just the numbers. Our real-world business experience delivers just that.
