Insights

Budget 2026

Jun 2, 2026 | Articles, News

The new budget comes at a key time for the economy, with the Government’s spending and tax settings under close watch. With many households and businesses still feeling the effects of a tough economic environment, this year’s Budget gives a clearer sense of the Government’s priorities for the years ahead.

Finance Minister Nicola Willis delivered Budget 2026 on 28 May 2026. It was a restrained approach focused on returning the Crown accounts to surplus by 2028/29, while maintaining investment in core public services. For investors and business owners, the Budget brings a mix of targeted tax changes, new infrastructure spending, and a levy on financial institutions.

Below, we outline the key policy changes for investors and business owners.

Simplifying Tax

NZ investors holding offshore investments, with an exception for Australia, have been subject to the Foreign Investor Funds (FIF) tax rules. For many investors, undertaking FIF tax calculations has been complicated and required professional assistance.

One notable exception to these rules are individuals with offshore investments with a combined cost value of less than NZ$50,000 in any 12-month period. This is called the “de minimis exemption”. These investors pay tax on dividends and other cash income.

Budget 2026 increases the entry point into FIF from $50,000 to $100,000 per person. The increased threshold for individual investors is a welcome change, and will reduce some of the complexity and costs associated with investing directly in offshore investments.

Several changes will be of direct interest to clients and business owners:

Fringe benefit tax (FBT) rules for private motor vehicle use will be simplified to reduce compliance costs.
Changes to tax rules are intended to support increased foreign investment.
- De minimis exemption threshold increased to $100,000.
- FIF calculation approach, Revenue Accounting Method (RAM), extended to all New Zealand taxpayers.
- A new prudential levy will be introduced on banks and other financial institutions. The levy is intended to fund the cost of services provided by the Reserve Bank. The levy is expected to raise $290 million over four years to help cover the cost of regulation and supervision by the Reserve Bank

Key Areas of Spending

Health receives the lion’s share of new investment. Budget 2026 provides a $5.5 billion increase in funding for frontline health services, with capital investment of $682 million including a new tower block for Whangārei Hospital. An additional $54 million has been allocated to Pharmac for medicines, and $35 million to boost road ambulance services.

Education sees significant reinvestment, alongside a notable policy change. Final-year Fees Free will end at the end of 2026, saving just over $1 billion. Some of those savings are being redirected into vocational training, including funding for 1,000 more Youth Guarantee places, providing free learning for young people with no or low qualifications and doubling Trades Academy places to 20,000 for Year 11–13 students. Capital investment of $470 million will redevelop up to 10 schools and deliver up to 232 additional classrooms.

Infrastructure receives substantial capital investment. Highlights include $1.8 billion for the Cambridge to Piarere Expressway (a new Road of National Significance), $705 million capital and $477 million operating funding to renew and upgrade the rail network, $400 million for state highway resilience upgrades, and $400 million to introduce a new financial incentive for councils to encourage housing growth.

Defence sees a major uplift. A total of $2.3 billion in capital and $1.2 billion in operating funding has been allocated to defence and intelligence capabilities, covering staffing, military base facilities, and keeping the Anzac-class frigates and other assets operational.

Summary

The Budget signals a commitment to returning to surplus while maintaining spending on core public services.

For clients, the key points to be aware of are: