Budget 2026

Budget 2026 dropped in the middle of a period of uncertainty for many in New Zeraland, cost of living pressures are still persistent and we are dealing with the impacts of the war in Iran - all making for a relatively uncertain operating environment for many kiwi businesses. Even with the upcoming election this budget never felt like it was going to be delivering radical reform, and was never close to being coined a "lolli scramble".

So what does Budget 2026 mean for NZ Business - we have a handful of changes that are largely focused around reducing compliance and tax system integrity.

Research and Development Tax Credits

These are moving from an end of year payment based on a return to a in year tax credit - the intention here is to shorten the time between approved expenditure and the tax credit benefit. Some amendments have also been made to the administrative side to allow greater flexibility for correcting small errors or filing delays. Overall these moves would support more spending in the space and orientate the programme toward externally facing developments.

FIF Changes

FIF income has been a bone of contention for a number of years, with taxable income often not aligning with cash dividends. To reduce compliance costs Budget 2026 proposes an increase in the de minimus threshold from $50,000 to $100,000 - removing complex income calculation for more investors. RAM (Revenue Account Method) has also been extended to tax residents after the scheme was recently introduced to new migrants, aligning tax treatment to Cash Dividends and Realised Gain on unlisted overseas shares.

FBT

After being signalled early last year as part of the wider FBT review we are finally counting down the days until we don't have to count the days! From 1 April 2027 taxpayers will no longer have to maintain log books, count exempt days, and navigate work related vehicle rules. A category approach has been proposed where vehicles are associated with a broad usage descriptions - with tolerances for occasional out of category usage eg the used of a vehicle that has no private use on work days to move house - essentially a close enough is good enough approach. There has also been changes to rates for vehicle fuel types and valuation. We will cover this in more detail in the coming months - implementation is 1 April 2027, so there is time to work through the impact to your business.

Shareholder Loans

New rules mean that any loan from a closely held company to shareholders or associates are crystallised as income to that individual 6 months after a company is liquidated or removed from the register. The 6 months allows time to reinstate companies that were removed in error. Any balance will be taxed under the financial arrangement rules with a BPA calculation resulting in income on wash up. Another reminder to manage balances with shareholders while a company is active as the tax impacts of not doing so won't go away on liquidation.

Charities and Not for Profits

Another topic that has been simmering away in the background - Budget 2026 looked to sure up Not for Profits by ensuring membership fees and levies remain non taxable, while increasing the tax free threshold for NFP's to $10,000 from $1,000 (that was set in 1979!) - these eligible NFPs are also not required to file a tax return with the IRD.

On the Charity front the Government has moved to limit claimable donations to the lower of $100,000 or Taxable Income - maximum rebate $33,333 - this will impact 350 Donors or .1% of all Donors and is intended to limit tax planning of individuals who gave significant funds to charities they control.

IRD Funding

The IRD received an additional $15m a year for compliance efforts - the Government is seeing a great return on their investment to date so is looking to see this continue - for taxpayers expect to see an ever increasing precense of the IRD.

Other Points

Of note this is the first budget in a while where we haven't seen some form of tinkering with Residential Property / Interest / Brightine - this gives those in this space some short term certainty., there was however funding to encourage councils to progress developments and also to assist with accelerating RMA - both areas that have a direct impact on the Residential Construction and Investment space. We also didn't see any significant tax base changes or changes to the superannuation scheme - but remember it is election year, so we might see some policy on this roll out over the coming months...

As alluded to above these are all proposals and pending final implementation - if you have any questions reach out and we will be happy to discuss.

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