MEDIA RELEASE (NZ)

Two weeks out from the 2025 Budget, Chartered Accountants Australia and New Zealand (CA ANZ) Country Head Peter Vial FCA shares the key areas the peak accounting organisation is expecting action on, including tax incentives, recovery of tax debt, infrastructure and health.

“This is going to be a tricky budget. Although this Government wants to stimulate economic growth, it has significant debt to pay down, and must focus on investing in our health, education and defence sectors,” said Mr Vial.

“To handle future economic shocks and ease the burden on future generations, we must control our $175 billion public debt and the nearly $10 billion annual interest it incurs.

"There are more than 31,000 chartered accountants in New Zealand who are expecting this to be a fiscally responsible budget. They are not expecting a lolly scramble or sugar hits. They know that any tax relief will be very targeted to get the best bang for growth buck.”

1. Accelerated depreciation

“Changes to the corporate tax rate should be off the table – it’s simply too expensive. However, given the Government’s focus on growth and infrastructure investment, we would like to see accelerated depreciation for plant and equipment.

“This would incentivise capital investment by allowing businesses to claim higher upfront tax depreciation deductions on the purchase of certain types of assets – think industrial plant and equipment.

“New Zealand's low productivity is not due to poor work ethic but rather a lack of investment in productive assets. Accelerated depreciation is a sensible investment to address this, even during constrained times.

“It’s not going to kick start new business, but it will incentivise capital investment to increase production and efficiency.”

2. Foreign Investment Fund changes

"The proposed targeted changes to the foreign investment fund (FIF) rules should proceed. The changes will remove a disincentive for migrants with substantial overseas investments to relocate to New Zealand by giving them a more favourable option to manage their New Zealand tax liability on those investments.

The FIF rules determine how New Zealand tax residents are taxed on holdings of less than 10% in overseas companies.

“We should see a new Revenue Account Method introduced, which changes the way income from FIFs is calculated. Essentially, those impacted will only be taxed on dividends or a proposed 70% of realised gains if funds are sold down, rather than on the unrealised gains from their foreign investments.

“The upside is that New Zealand gains the skills, resources and connections that high net worth individuals bring to the country, and in our view it’s worth making this concession. Over time we would like to see availability of this method extended to all New Zealanders.”

3. More money to find money

“Inland Revenue is pursuing tax debt with a vengeance, and we expect they are going to be given more funding to enhance their efforts.”

“As of June 2024, tax debt was nearly $8 billion. GST, which accounts for 25% of tax revenue, but which makes up 39% of the total tax debt, will be a key area of focus.

“The Government has received a good return on investment so far. There was a 33% increase in overdue debt collected between Q1 of 2024 and Q1 of 2025. We wouldn’t be surprised if there is a resource increase in this budget, to drive those collections.

“Not only is there significant known tax debt to collect, but Inland Revenue is also undertaking significant audit enforcement activity, targeting fraud, the hidden economy, and cryptocurrency.

­“In last year’s Budget, the Government committed $116m - $29m per year over four years - to Inland Revenue to support increased compliance activities with a total return on investment of $702 million, expected over the period.­

“Inland Revenue has already signalled a focus on the property and construction sectors. Other businesses with high volumes of cash transactions will be in their sights for audit. If the Government bumps up Inland Revenue’s resource, then expect even more compliance activity in the years ahead.

“While COVID-19 may seem to be in the past, its economic impact continues. It would not be a surprise if the Government increases resources to address improperly claimed Covid support payments.”

4. KiwiSaver to fuel infrastructure

“There have been real challenges securing funding for major growth projects such as Transmission Gully and extending the Auckland to Northland Motorway.

“We’ll be looking at the budget for signals as to how the Government chooses to fund major infrastructure. We believe the Government should continue to work on how it enables KiwiSaver funds to invest in large infrastructure projects.

“Current regulations prevent KiwiSaver from investing in large-scale, long-term projects due to a liquidity requirement. This rule states that funds must be available quickly to cover KiwiSaver withdrawals, limiting investments in long-term projects.

“We know this Government wants to drive large projects, and simplifying restrictions on KiwiSaver would match the funds with our need for infrastructure – potentially a match made in growth heaven.”

5. Funding and innovative solutions for healthcare challenges

"Chartered Accountants who work in the health sector are telling us that the whole health ecosystem, including hospitals, GPs, specialists, and midwives is underfunded.

“Primary health care is particularly under pressure to develop the next generation of GPs. It’s estimated that 60% of GPs are going to retire in the next 10 years, and we desperately need to shore up the talent pipeline.

“If GP pay cannot be increased, the Government should consider other innovations like forgiving medical student loans or offering incentives for graduate GPs to work in specific regions. Bonding to a region might be part of the arrangement.

“Economic growth requires a healthy population, so applying some of the operating allowance to support primary health is worth it.

"Health is not our usual area of focus, but our members are saying that, without a significant funding increase in the Budget, they believe the Government must consider creative solutions to primary, secondary and tertiary health challenges."