MEDIA RELEASE (NZ)

The Government's 'Investment Boost' announcement to 'accelerate depreciation' is more generous than many expected, and should significantly increase productivity, says Chartered Accountants Australia and New Zealand NZ Country Head Peter Vial FCA.

"New Zealand's low productivity is not due to poor work ethic or laziness, but rather a lack of capital investment in equipment, machinery and technology. The Investment Boost tax incentive strikes at the heart of this, by allowing businesses to immediately deduct 20% of the cost of new assets in the year of purchase, from their taxable income.

"Investment Boost will likely encourage immediate positive investment from businesses that have been otherwise waiting for the domestic economy to improve. The good news is that it applies from today and there is no cap on the deduction amount.

"We think the Government could have achieved the same goal, with a narrower scope of assets eligible for the incentive. We would have preferred a more targeted approach, focused on the most productive assets.

"Importantly, Investment Boost applies to imported second-hand assets, particularly heavy equipment needed for infrastructure development and transport.

"Our IT, agriculture and property sectors have succeeded because they have high levels of capital investment. We need more sectors, particularly manufacturing, health care and education, to do the same, and accelerated depreciation incentivises this.

For example Norsewear, a clothing manufacturer based in Hawke's Bay, recently invested in two $70,000 wool spinning machines, leading them to outcompete several international rivals to secure a significant contract with the New Zealand Defence Force.

KiwiSaver changes

"Increasing the KiwiSaver default contribution rate to 4% will be a cost for both employees and employers," said Mr Vial

"Employers will be relieved that the increase in their contribution obligations is phased in over three years, but some will be frustrated that the changes mean the costs of KiwiSaver are being moved in part from the Government to employers.

The Government is halving the maximum annual contribution to $260.72 (25 cents for each dollar a member contributes up to $1,042) and removing the annual Government contribution for KiwiSavers whose income exceeds $180,000 from 1 July.

"It is a sad reality that Kiwis who most need to save can least afford to do so particularly in the current economic climate where the cost of living is a challenge for many.

"We are therefore pleased to see that KiwiSavers will be able to opt down to the current contribution rate of 3% for 12 months from 1 February 2026 and then reapply to opt down in later years.

"This concession should mean fewer KiwiSavers than otherwise could have been the case will need to suspend their savings in constrained times. However, the opt down option is likely to exacerbate the existing retirement savings gap between men and women," concluded Mr Vial.