Budget 2026, the budget for a secure future

Finance Minister Nicola Willis has delivered the New Zealand Government’s Budget 2026 – the last major fiscal statement before the New Zealand General Election. The Government has framed the Budget as continuing a programme of fiscal repair and discipline, alongside investment in essential services and infrastructure.

Budget 2026 includes an average of NZD2.1 billion per year in net new operating spending (comprising NZD3.8 billion of new operating initiatives, offset by NZD1.7 billion of operating savings) and NZD5.7 billion in net new capital spending.

For businesses, the most relevant announcements include targeted changes across tax settings and Inland Revenue compliance activity, cost recovery for prudential regulation and supervision, and planning and development reform funding.

Budget 2026 also introduces a proposed new financial industry levy (a new prudential levy) on banks, non-bank deposit takers, insurers and certain financial market infrastructure providers to help cover the cost of prudential regulation and supervision by the Reserve Bank of New Zealand (RBNZ). The levy is estimated to recover around NZD209 million over four years, with consultation to follow and an intended introduction in mid-2027, after the General Election.

While many initiatives will need to be implemented through legislation, policy decisions and consultation, the announcements signal a continued focus on revenue integrity and compliance, targeted adjustments to investment and innovation settings, and substantial reform and funding across core regulatory systems.

Against that backdrop, the Budget includes significant savings measures, while signalling continued support for the delivery of core public services such as healthcare, education, law and order, and defence.

Across sectors, three themes emerge:

• Rising compliance and regulatory expectations across tax, and financial services regulation
• Continued opportunity in infrastructure and energy, and resilience-related investment
• Shifting investment and planning frameworks, particularly affecting development and housing growth settings.

The key points relevant to businesses operating in New Zealand are as follows:

1. Prudential levy on financial institutions (cost recovery for regulation and supervision): The Government has announced a proposed prudential industry levy on deposit takers, insurers and financial market infrastructures. The levy is expected to recover around NZD209 million over four years, and, according to the Government, would represent less than 1% of the annual profits of New Zealand’s four largest banks.
   
   The Government has also signalled updates to the thin capitalisation rules for foreign-owned New Zealand banking groups. These changes are expected to increase tax revenue over the forecast period and appear intended to align the tax rules more closely with banking sector prudential capital settings.
   
   
2. Planning reform and development settings: Substantial funding is directed towards reform of the resource management system, including investment in a centralised digital planning platform, data and analytics, and reform implementation. Developers and investors should expect a changing planning and approvals landscape, including transitional complexity as reforms are implemented.
   
   
3. Foreign investment fund (FIF) rules: Budget 2026 includes further changes to the foreign investment fund rules, including expanded access to the revenue account method (RAM), which will now be available to all New Zealand taxpayers in respect of unlisted shares. One of the most significant changes is the increase of the FIF de minimis threshold from NZD50,000 to NZD100,000, alongside expanded access to the attributable FIF income method.
   
   
4. Financial arrangement rules amended to support new migrants: After the uptick in Active Investor Plus (AIP) visa, the Government has announced amendments to the financial arrangement rules to reduce the impact of foreign exchange movements for individuals, including certain migrants and AIP visa applicants. The policy objective is to support New Zealand’s ability to attract and retain migrants and investors, while reducing the risk of double taxation in specified circumstances.
   
   
5. Not-for-profit and charitable sector tax changes: The Government has announced adjustments to the amounts not-for-profit organisations can earn without paying tax, from NZD1,000 to NZD10,000, and ensuring that membership subscriptions and levies received are non-taxable. Eligible donations have also been capped to NZD100,000 with the policy intent being to limit the risk of donors gifting to charities that they control. In addition, these changes also include mechanisms for donors to receive donation tax credit refunds throughout the year rather than at tax year-end, as well as gift their donation tax credit to a charity.
   
   
6. Simplification of fringe benefit tax for private vehicles: The Government has introduced a category-based approach for determining the private use of employer-provided motor vehicles. No requirement for detailed logbooks, instead according to Minister Willis, a “close enough is good enough” approach will be acceptable.
   
   
7. R&D tax changes: The Government has announced a change to New Zealand’s R&D tax rules. Notably, the cap on eligible internal non-administrative software expenditure has been reduced from NZD25 million to NZD3 million per year, limiting the tax benefits for large-scale software development. However, R&D tax credits can now be claimed during a financial year, rather than just at the end of one, easing cash flow constraints associated with upfront R&D expenditure.
   
   
8. Non-resident contractors’ tax (NRCT) changes: Aircraft asset leasing will now be exempted from the NRCT regime. A further welcome change is the NRCT exemption threshold being increased from NZD15,000 to NZD75,000. There are also proposed exclusions for certain ‘low-risk’ non-resident contractors and the inclusion of a bespoke non-resident contractors’ tax code.
   
   
9. Shareholder loans: A new integrity measure will be introduced to tax loans made by companies to shareholders that remain outstanding six months after the company is removed from the Companies Register. This rule is designed to address arrangements that defer or avoid dividend taxation through the use of shareholder loans, particularly in connection with company liquidation or deregistration.
   
   
10. Inland Revenue debt compliance activity: Much like the last Budget, the Minister has announced the Government will contribute an extra NZD15 million per year for the next four years, for Inland Revenue’s audit and compliance activities, with the Government expecting this investment to result in NZD45 million of additional tax revenue per year. This signals a continued focus on enforcement and is likely to result in increased audit and collection activity by Inland Revenue.
    
    
11. Energy and fuel price-related initiatives: Various measures relating to supporting New Zealand in the current global fuel crisis have been announced. This includes holding a NZD450 million reserve for targeted support (if conditions worsen) and NZD150 million for additional strategic fuel reserves to firm up resilience.
    
    
12. The Energy Funding Reprioritisation initiative: This initiative returns previous funding for Ara Ake, the Government Investment in Decarbonising Industry (GIDI) fund and the Warmer Kiwi Homes programme (c. NZD77 million). Those funds are mostly redeployed to fund the Energy Efficiency and Conservation Authority (EECA)’s Gas Transition Loan Guarantee Scheme (announced earlier in the week) and its Solar on Schools grant programme. As part of the energy security initiative, capital investment into Genesis Energy will accelerate investment in new electricity generation and firming capacity.
    
    
13. Increased spending in core public services: The Government has announced increased spending across core public services, including health, education, law and order, and defence.
    
    In health, Budget 2026 includes funding for Health New Zealand to strengthen cyber security and upgrade digital services and devices. In education, the Government has announced additional investment across schooling and education-related initiatives.
    
    Law and order is also a significant focus, with further funding for Corrections to respond to prison population pressures and support frontline resourcing. Police will receive additional operating and capital funding over the forecast period, while Rotorua will receive funding for new courthouse facilities.
    
    In defence, Budget 2026 provides further investment in military capability, including drone systems, critical ship maintenance and naval upgrades.

14. Infrastructure investment and pipeline: The Government has announced net new capital spending of NZD5.7 billion, including funding for hospitals, schools, roads, rail and other infrastructure and resilience investments. Budget 2026 also includes funding for rail network investment and metropolitan rail infrastructure renewals.
    
    
15. Philanthropic option for AIP visas: In a related Budget-week announcement, the Government confirmed a philanthropic investment option for applicants under the AIP visa category. Applicants in the Growth category may allocate up to 20% of their required NZD5 million investment – up to NZD1 million – towards eligible philanthropic donations, including specified Department of Conservation initiatives and charitable purposes.

Please reach out if you wish to discuss the New Zealand Government’s 2026 Budget with any of our team.