Finance Minister Nicola Willis has unveiled her second Budget, revealing major changes to New Zealand’s KiwiSaver system and outlining how much she’s reprioritised from an overhaul of the pay equity system.
Within a tight $1.3 billion operating allowance, Willis has found $5.3 billion in savings and revenue-raising initiatives. That’s used to fund $6.7 billion in new spending annually.
Some of that new spending is going towards the “centrepiece” of the Budget, a new tax break for businesses, dubbed “Investment Boost” by Willis.
“This is a responsible Budget to secure New Zealand’s future,” Willis said. (Source: Other)
Kiwis will also be able to receive 12-month prescriptions for medications from 2026, and an extended rates relief scheme will benefit up to 66,000 SuperGold cardholders.
John Campbell and Nicola Willis clash over govt payments, pay equity – watch on TVNZ+
There’s also changes to Working for Families and the Best Start scheme, and eligibility changes to Jobseeker benefits for certain age groups.
$12.8b saved from pay equity changes
The Government’s changes to the pay equity scheme have provided a massive infusion into the Budget – to the tune of almost $3 billion a year or $11 billion over the next four years.
But the sectors’ gain is likely to be at the expense of pay equity claims. (Source: 1News)
An additional $1.8 billion over the forecast period in capital spending would also be reprioritised in the books.
Willis had previously denied the sweeping changes, passed under urgency, had anything to do with making the Government’s books add up.
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“Significant Budget savings have resulted from fixing Labour’s flawed pay-equity regime and removing an assumption that the Government would fully-fund potential settlements involving non-Government employers,” she said today.
“This funding has been redirected to support investments in frontline health, education and other government services.”
Within a tight $1.3b operating allowance, Nicola Willis has found $5.3b in savings and revenue-raising initiatives. (Source: 1News)
The figure saved doesn’t include contingency figures associated with the system, which Willis said was consistent with Treasury advice as it was commercially sensitive.
Big KiwiSaver changes across the board
Widely speculated about ahead of the Budget, the Government has unveiled a set of changes to KiwiSaver, the most significant to affect the scheme in a decade.
Default contribution rates will increase to 4%, including the minimum contribution from employers, from April 2028. But rates will first rise to 3.5% from April next year.
The value of the government’s $521 KiwiSaver contribution is being halved, so that individuals receive a contribution of 25 cents per dollar of employee contribution, up to a maximum of only $260.72 a year. This change will apply from July 2025.
Additionally, there will now be means-testing on the government contribution with eligibility limited to people who earn under $180,000. KiwiSaver benefits, such as employer and government contributions, will also now be extended to 16- and 17-year-olds.
Tax break for productivity-boosting assets
Willis said the “centrepiece” of the Government’s Budget would be a new so-called “Investment Boost” tax deduction for businesses. The incentives would apply to the cost of buying “productive assets” – like machinery, tools, equipment, vehicles and technology.
“Investment Boost allows a business to immediately deduct 20% of the cost of a new asset, on top of depreciation, meaning a much lower tax bill in the year of purchase,” she said.
“Cashflows are better, making more potential investments stack up financially.”
Treasury and Inland Revenue have forecasted the change will boost New Zealand’s GDP.
“Investment Boost delivers more bang for buck than a company tax cut because it only applies to new investments, not those made in the past,” Willis said.
New 12-month prescriptions coming next year
New Zealanders will soon be able to receive 12-month prescriptions for their medicines, delivering savings to patients on long-term medications.
“Currently, doctors and other prescribers can only prescribe most medicines for a maximum of three months at a time,” Health Minister Simeon Brown said.
“Patients must then pay their GP for a follow-up appointment or to issue a repeat prescription every three months.”
The Health Minister said the existing limitations created “unnecessary barriers” for people on stable, long-term medications like asthma inhalers and insulin for diabetes.
“From the first quarter of 2026, prescribers will be able to issue prescriptions for up to 12 months if it is clinically appropriate and safe to do so.
“While patients will still collect their medication from a pharmacy every three months, they will no longer need to return to their doctor for a new prescription each time.”
SuperGold Card rates rebates to benefit ‘up to 66,000’
The Government will introduce a new income abatement threshold to assist SuperGold cardholders from July, Seniors Minister Casey Costello announced.
“This is the first time we are introducing a separate income abatement threshold to the Rates Rebate Scheme,” she said. “It will mean that every SuperGold cardholder earning only NZ Superannuation, with rates higher than $2000, will be eligible for the full rebate.
“Cardholders earning more than $45,000 may also be entitled to a smaller rebate.”
She said the change would “come as a relief to those seniors who are on fixed incomes and are dealing with rates increases.”
The income abatement threshold to be eligible for the maximum rebate for SuperGold cardholders and their households will be lifted from $31,510 to $45,000 – about the rate for a couple receiving superannuation. The maximum rebate will also rise from $790 to $805.
Working For Families to rise but Best Start to be fully means-tested
About 142,000 families will receive an average of $14 a fortnight extra from Working for Families, according to Social Development Minister Louise Upston.
These changes are being delivered through changes to the abatement threshold – the income level at which Working for Families entitlements begin to reduce.
“The Government is lifting the Working for Families abatement threshold from $42,700 to $44,900 and raising the abatement rate from 27% to 27.5%. Families with incomes close to the new threshold will get greater additional payments – up to $23 a fortnight.
“The cost of the extra support will be met by income testing the first year of the Best Start tax credit in the same way the second and third years are, with payments starting to diminish above a family income of $79,000 and cutting off entirely when a family earns just over $97,000 a year.”
Families of children born before April 2026 won’t have their Best Start payments income tested and will continue to receive the maximum amount until their child turns one.
Currently Best Start payments aren’t means tested for children in their first year.
Jobseeker eligibility tightened for 18- and 19-year-olds
Parents have been urged to “step up” for unemployed teenagers as part of this year’s Budget with eligibility tightened for people under 20.
Upston said: “With this announcement, we’re clearly saying that 18- and 19-year-olds who don’t study or work and can’t support themselves financially, should be supported by their parents or guardians, not by the taxpayer.
“That’s why from July 2027, eligibility for Jobseeker Support and the Emergency Benefit will be tightened for single unemployed 18- and 19-year-olds by introducing a parental assistance test.
“Young people can’t expect to go automatically onto a benefit, and parents must be ready to help. This change strengthens financial incentives to enter employment, education or training.”
