Alan Scott
Tax Partner
Amid ongoing geopolitical tensions and global economic uncertainty, and with a general election on the horizon later this year, as expected, the Government has emphasised fiscal discipline and reprioritisation over big new initiatives. However, the $7 billion capital investment into the infrastructure pipeline for programmes that support the delivery of core public services, is estimated to deliver around 4,500 jobs for every billion dollars spent. Additionally, Budget 2026 provided some clarity on the Government’s “prudent” response to the global fuel crisis, providing an overview of support for front line services and targeted contingencies for the health and education sector to help these sectors respond to the pressures of rising fuel prices. This shift from growth-focused spending to consolidation signals an intent to avoid adding further stimulus or new taxes, instead building resilience into the economy through targeted investments and careful reallocation of resources.
Resilience has also surfaced as a key theme in the latest six-monthly BDO Business Performance Index (BPI) which shows a growing number of business leaders in select markets and sectors signalling positivity with their financial performance – however overall business performance sentiment remains weighed down by economic uncertainty, political concerns, and cash flow pressures. Global conflict, fuel price inflation, and fluctuating economic fortunes have been flagged as top issues by New Zealand business leaders.
In today’s Budget unveiling, the Finance Minister will be hoping to have quelled at least a small degree of economic uncertainty among business leaders by providing transparency of the Government’s fiscal position and outlook.
Below, we share the highlights of Budget 2026 before diving into the key takeouts for New Zealand business leaders.
As signalled ahead of Budget Day, investment in core public services has been prioritised with the goal of driving better results and securing New Zealand’s future by getting back to surplus and reducing debt as a share of GDP.
Budget 2026 also:
“Policies aside, what’s important for businesses is that they now have more clarity around the direction of economic travel. It’s beneficial to see that the government has clarified that we’re on target to clear debt by 2028/29 with no further tax increases.” – Justin Martin, BDO National Advisory Leader
Tax & economyA range of measures to support the Government’s commitment to economic growth.
Investing in businessNew initiatives to support Kiwi businesses.
Fuel responseTemporary, timely and targeted funding for households and public services facing fuel pressures.
Measures to ensure New Zealanders can access quality and timely healthcare.
Learn about the impacts of Budget 2026 on the healthcare sector here.
Funding for infrastructure investments to boost growth and provide better public services.
Read more about what this investment could mean for the construction sector here.
Investments in defence and law and order to keep New Zealanders safe.
Funding to support the provision of social services.
Funding to help lift academic achievement.
Other boosts for the New Zealand economy.
Alan Scott, Tax Partner, highlights the key policy announcements of Budget 2026 in the video below.
Here is an overview of the policies and measures that should be business friendly:
“Budget 2026 introduces several pragmatic changes for the not‑for‑profit sector, particularly for smaller organisations. Increasing the tax‑free income threshold from $1,000 to $10,000 should meaningfully reduce administrative burden for charities earning modest levels of trading income, while in‑year donation tax credits and the ability to gift those credits, could improve cashflow and flexibility for donors. It is also reassuring to see confirmation that membership subscriptions and levies will remain non‑taxable, which will be a relief for many organisations, although the detail around how this is applied in practice will be important. The key trade‑off is the introduction of a cap on eligible donations. While this strengthens the integrity of the system and helps ensure concessions are used for genuine public benefit, there may be some concern across the sector about whether it could reduce giving from larger donors. Overall, the Budget signals a clear shift towards balancing support for the sector who are a critical part of our communities, with a stronger focus on transparency, sustainability, and integrity.” - Vanessa Rowe, National Not-for-Profit Sector Leader
The significant boost in the capital allowance from $3.5b to $5.7b, announced in pre-Budget commentary will be used for the following projects and programmes:
“The Government’s initiative to increase spending and grow the pipeline of work ahead for civil infrastructure programmes will be encouraging for businesses in the sector that have been navigating uncertainty. The infrastructure boost in Budget 2026 could help play a role in retaining some of the wider pool of construction talent, who might otherwise have been at risk of seeking opportunities offshore. What will be important, is to ensure broader economic stimuli over the coming months - both market-driven and politically-led - continue to grow work pipelines across all areas of construction in order for financial health of the sector to return.” – Nick Innes-Jones, BDO National Construction Sector Leader
Following the closure of some gas-dependent manufacturing businesses due to energy costs, Budget 2026 introduces the Gas Transition Loan Guarantee Scheme. The Government will guarantee up to $1.2 billion of bank lending to help businesses reduce their reliance on natural gas. Under the scheme, the Crown will guarantee 80% of each supported loan, with banks expected to pass on lower interest rates to borrowers. Budget 2026 also sets aside $48 million to cover potential losses from the scheme.
With gas reserves rapidly declining and prices rising, the loans are intended to help businesses reduce their energy costs and stay competitive by enabling them to switch some or all their processes to run on alternative fuel sources. To access the loans, businesses must “achieve genuine gas savings of at least 15% while maintaining or increasing production, ensuring the focus is on growing the economy and protecting jobs, not shrinking output”. There will also be a change to the Gas Act, requiring improved information disclosure passed as part of Budget 2026 measures.
Budget 2026 also provides $5.9 million for the Energy Efficiency and Conservation Authority to work with businesses exploring options to transition away from gas. It is estimated that if the full lending ($1.2b) goes ahead, up to 10 petajoules (PJ) of gas use could be reduced each year. That’s enough to supply roughly 400,000 average Kiwi homes with gas for a whole year.
Businesses that may benefit from this initiative:
While the scheme incentivises businesses to consider alternative fuel, it will be interesting to see how many business leaders are willing to take on further debt and negotiate the complexities of transitioning energy when faced with competing business priorities.
In addition to the gas transition loan scheme, Budget 2026 provides capital funding of around $200m of new shares as part of Genesis Energy’s $400m capital raise announced in February. This intends to bring more flexible capacity to the electricity market and address the risk of insufficient electricity supply in years when the hydro-lakes run low.
Hon Simon Watts announced tax changes “to strengthen New Zealand’s tax system, encourage investment and make it easier to comply with.”
The fiscal impact of some changes over the period 2025/26 to 2029/30 will be funded through the Tax Policy Scorecard which allows the fiscal impacts of minor tax policy changes to be offset against one another, rather than being managed through Budget allowances.
“It is encouraging to see that simplifying the tax system has been a feature of Budget 2026, especially as this includes positive changes for New Zealand’s business owners. However, more could have been done in this area given the uncertainty facing businesses as we make our way through the rest of the year.” – Alan Scott, BDO Tax Partner
Changes include:
As anticipated, Budget 2026 has further increased the funding for Inland Revenue to carry out tax compliance and collection activities by an additional $15m per annum.
Around 97% of New Zealand businesses are classed as SMEs or microbusinesses and Inland Revenue have advised that as of June 2025, these businesses account for 61% of all tax debt, highlighting how widespread tax debt pressures can be across the economy.
Last year, the Government added $35 million to the annual funding allocation, bringing the total to $62 million.
“Businesses should continue to expect increased audit compliance activity from Inland Revenue and be prepared for it. The recent extension of tax pooling to deal with historic tax debt relating to the 2023 or 2024 tax years, not only highlights the growing problem of historic tax debt but also represents a practical approach, which will likely be welcomed by those taxpayers who can benefit from this extension.” – Alan Scott, BDO Tax Partner
Read more about tax pooling for historic debt and see whether it could be right for your business here.
Today’s Budget, while consciously fiscally restrained, offers some support for business leaders in the areas of fringe benefit tax simplification and the significant investment in infrastructure, in terms of job creation and talent retention. However, the BDO Business Performance Index (BPI) shows there is a wide range of business issues currently on the minds of New Zealand business leaders – many of which are not specifically addressed by Budget 2026 policy announcements or existing Election policies of the major parties. To learn more about the priority issues for business leaders in key sectors and markets, along with suggested business tips from leading BDO accountants, view the May 2026 BPI report here.
Alan Scott
