Business and Tax Updates September 2025: IBBZ Accounting

Summary:

Spring is here and daylight saving has begun, making it a great time to refresh and refocus on your financial and tax obligations. This is an ideal moment to review your progress like filing GST returns, reconciling payroll, reviewing provisional tax, and checking year-to-date financial performance. Acting early helps avoid unnecessary stress later in the year.

Several important tax changes also came into effect this month. We have highlighted the key changes and reminders throughout this newsletter to keep you well-informed and prepared

At IBBZ Accounting, we remain committed to helping you plan, meet your obligations, and navigate changes with clarity. As always, our team is here to support you throughout the financial year.

Thank you for your continued trust in our services.

Key Business Updates

1. New Zealand’s Gross Domestic Product (GDP) Update

New Zealand’s GDP dropped 0.9% in the June 2025 quarter, with annual growth recorded at just 1.1%. GDP, the official measure of economic growth, has now declined in three of the last five quarters, signalling ongoing economic softness.

The contraction was largely driver by weaker performances in the manufacturing, construction and agricultural industries.

Looking ahead, forecast suggest a gradual recovery with growth expected to lift to around 1% later this year and up to 2% next year.

The RBNZ reduced the OCR last month by 25 basis points to 3% last month and has indicated that further cuts may follow in October and November.

2. New Business Investor Visa to Support Growth

The Government has announced the Business Investor Visa (BIV), designed to attract experienced business professionals and encourage overseas investments into New Zealand businesses.

 Applications open from November 2025, offers two investment pathways:

1. $1 million investment in existing business – providing a three-year work to residence pathway.

2. $2 million investment in an existing business – offering a 12-montn fast track to residence.

What the BIV means for Businesses:

1. Access to Fresh Capital: Easier to attract overseas investors with significant funds.

2. Succession planning opportunities: Opens new pathways for business owners planning an exit or retirement. Overseas investors may step in to purchase or partner with existing businesses, helping ensure continuity, preserve jobs and support long-term growth.

3. Employment Growth: Investors are required to put money into existing NZ businesses, thus more job roles and local work.

4. Global Expertise: Investors often bring international knowledge and networks.

5. Competitive Advantage: Well-structured, investment-ready businesses will be more attractive to overseas investors. Maintaining clear financials, strong compliance and growth plans will greatly improve the chances of securing investment.

3. Leave Overhaul and What it means for Businesses

The government has announced its intention to repeal the ‘Holidays Act 2003’ and replace it with a new ‘Employment Leave Act’, expected to be introduced to Parliament in early 2026.If enacted, businesses will have a two-year implementation period to transition to the new rules.

1. Accrual from Day One: Currently, annual leave starts after 12 month and sick leaves after 6 months. Proposed: both annual and sick leave would accrue hourly from the first day of employment, instead of waiting 6 or 12 months.

2. Simpler Pay Calculation: Currently, employers choose between ordinary weekly pay and average weekly earnings, which may case errors. Proposed: is all leave would be paid at one hourly base rate.

3. Casual & Extra Hours: Currently, casual employees receive 8% holiday pay instead of accruing leave, and additional hours for part-time staff can create unexpected entitlements. Proposed: casual and additional hours worked will attract a 12.5% leave loading at the time worked, with no future leave accrual.

4. Cash Up Option: Currently, employees can request up to 1 week of annual leave each year if the employer agrees. Proposed: employees could cash up to 25% of annual leave each year.

5. Public Holidays: Currently, deciding if a public holiday is an ‘otherwise working day’ is complex and ‘alternate leave’ granted as full days. Proposed: a simpler test for ‘otherwise working day’ and ‘alternative holidays’ earned in hours.

6. Bereavement & Family Violence Leave: Currently, employees usually qualify for bereavement and family violence leave only after 6 months. Proposed: both entitlements would be available from day one of employment.

Important Tax Updates

1. FamilyBoost Tax Credit Changes Proposed

The Income Tax (FamilyBoost) Amendment Bill has been introduced to increase support for families with young children:

• Early Childhood Expenses (ECE): claimable share rises from 25% to 40%, maximum quarterly payment up to $1,560 (from $975).

• Income Thresholds: abatement rate reduced to 7% (from 9.75%); maximum household income cap lifted to $57,286 per quarter (≈$229,144 annually).

These are proposed changes only and not yet law. 

3. New taxation Bill introduced

The Government has introduced the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill.

The key tax changes include:

• Foreign Investments: simpler calculation of foreign investment fund (FIF) income. The new rules will include revenue account method (RAM), seem Government target area here is digital nomads’ people who came to NZ during covid years, there is transitional residency will be ending now. So new rules will help them simplify their FIF reporting. Application of these new rules is to very limited number of taxpayers, for majority of NZ tax residents no change in FIF rules.

• Employee Share Schemes: option to defer tax for staff in unlisted companies. The application of these new rules is for again very limited number of taxpayers, mainly targeting digital nomads who owns shares in unlisted companies. The tax payment of ESS would be deferred.

• Solar & Home Power: small sales of excess electricity from homes may be tax-free.

• Remote Work by Visitors: short-term non-resident remote workers won’t trigger NZ tax residency. From 01-04-2026 the number of days test would be extended to 225 days in 18 months.

• Forfeited deposit on GST land transactions some clarifications were provided by the IRD. As there has been some cases where deposit is made to purchase the house, but the sale is not eventuated, thus what would be the tax treatment of the forfeited deposit, Is this taxable supply for the purpose of GST. In TDS it was held that this is not a taxable supply, the income tax rules will still apply.