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1News
22-05-2025
- Business
- 1News
Budget 2025: KiwiSaver changes, pay equity 'savings' revealed
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) Follow live coverage of the Budget on and TVNZ1's Q+A Special from 2pm. 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. There's also changes to Working for Families and the Best Start scheme, and eligibility changes to Jobseeker benefits for certain age groups. 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. 1News Political team Maiki Sherman and Benedict Collins explain what the Budget means to New Zealanders - watch on TVNZ+ '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." 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. 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. 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 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." 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. 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. 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."
1News
21-05-2025
- Business
- 1News
What might get a cut or a boost in today's Budget
Finance Minister Nicola Willis will unveil her high-stakes 2025 Budget today amid fever-pitch speculation over spending cuts as the coalition navigates the tightest operating allowance in a decade. The Government will only have $1.3 billion to play with in terms of new operational funding, which includes accounting for inflation and other cost increases. In a constrained fiscal environment, Willis has been prepping the public for more "reprioritisations" – coalition-speak for cutting existing initiatives to fund other priorities. The Finance Minister has been blunt about the approach, saying the Government has freed up "billions of dollars" through cuts to previously committed spending that "can no longer be justified in light of challenging circumstances". "This reprioritisation exercise has required careful consideration and some tough, but necessary, choices," she said. "This has involved a line-by-line review of previous funding commitments, including money put aside in contingency." Follow live coverage of the Budget on and TVNZ1's Q+A Special from 2pm. Most of these cuts, Willis has indicated, will come from programmes begun under the previous Labour government, though some longer-standing initiatives are also on the chopping block. There would also likely be more public service job losses down the line. The Government has already revealed it will save more than $1 billion over the next four years after it reduced the number of people living in emergency housing faster than expected. This represents just one of the budgetary "reprioritisations" expected. One of the most widely speculated-about cuts involves changes to KiwiSaver, which currently costs the Government about $1 billion annually. At present, residents aged 18 and over can receive up to $521 a year in government contributions to their KiwiSaver if they contribute at least $1040 per year themselves. Willis has repeatedly declined to rule out means-testing this benefit when questioned, saying only that people would need to "wait and see" what savings the Budget delivers. If changed, means-testing could see the government benefit removed entirely or reduced for higher-income earners, potentially using a $180,000 threshold. Alongside speculated changes to the subsidy, Willis has previously signalled her desire to increase KiwiSaver contribution rates from the current 3% minimum for employers. In a recent speech, she emphasised wanting "to see KiwiSaver balances continue to grow" and said "our Budget will contain steps to support that mission". Willis had signalled she would provide "modest measures to support business growth" in the Budget. These measures are likely to involve accelerated depreciation on certain "productivity-boosting" assets, BusinessDesk reports. In translation, this speculated change could effectively lower a business's taxable income in the short term by increasing the amount they can claim as depreciation expenses. Though the Finance Minister was at pains to temper expectations about a large scheme, when asked on Monday, saying some speculation out there had been wrong. PM Christopher Luxon said this week changing capital depreciation rules was "not an unattractive idea" given the need for businesses to invest more in technology and equipment. The Government has already announced a $75 million tax break for foreign investors and tech workers, including changes to thin capitalisation rules and employee share schemes. Willis has also promised "some carefully targeted cost-of-living relief" in the Budget, though details remain scarce as to what this may be. The Finance Minister has drawn a clear line, saying there will be "no lolly scramble" given current economic constraints. New spending would be "strictly limited to the most important priorities," with focus on "health, education, law and order, defence, and a small number of critical social investments". Some of these have already been announced. Among pre-Budget announcements were a $140 million package to improve student attendance, $100 million for maths education, and $275 million for social investment. Beyond KiwiSaver, Willis has not ruled out means-testing for other programmes, particularly the Best Start payment for new parents, which was introduced by Jacinda Ardern in 2017. The programme gives families a $73 weekly payment for children under one. While she has confirmed there will be no changes to the Winter Energy Payment, which costs $555 million annually, other government transfers remain vulnerable. In December, Treasury Secretary Iain Rennie suggested better targeting payments that go to everyone, including those who don't need support, as a way to improve the books. He gave the examples of free off-peak public transport for over-65s and the Government covering some tertiary students' fees as examples where better targeting may be possible. Education Minister Erica Stanford has teased that today's announcement will be a "learning support Budget", signalling investment in the system that supports students with disabilities and learning needs. The Budget boost is expected to come partly from discontinuing the $118 million Kāhui Ako programme, RNZ reports. Last year, Stanford told 1News she'd heard from the sector that the existing model was not "delivering the right service, to the right child, at the right time". A work programme had been delivered to Cabinet to improve learning support "so the education system could meet the needs of learners and their families". Other potential Budget changes speculated about in the media include adjustments to the foreign buyer ban, cuts to RNZ's annual funding, and cuts to other initiatives. The full extent of Nicola Willis' "tough but necessary choices" and new initiatives will become clear when Willis delivers her Budget at 2pm today.
