Budget 2026: What It Means for Your Business

On 28 May 2026, Finance Minister Nicola Willis delivered the Government's last Budget before the October election. Framed around "securing New Zealand's future," Budget 2026 avoids sweeping tax cuts in favour of targeted reforms designed to simplify compliance, encourage investment, and strengthen the integrity of the tax system. For business owners and self-employed individuals, there is both good news and cause for careful planning.

In this article, we break down the key changes that are most likely to affect you.

Simpler Rules for Motor Vehicle Fringe Benefit Tax

If your business provides vehicles to employees, you will be familiar with the compliance headaches of the current Fringe Benefit Tax (FBT) rules. Detailed logbooks, day-counting, and confusion over which vehicles qualify for exemptions have imposed real costs on employers for years.

From 1 April 2027, the Government intends to replace this system with a simpler, category- based approach. Instead of tracking every trip, employers will select a vehicle-use category based on the nature and extent of private use. The taxable value will be progressively scaled down the less the vehicle is designed to provide a private benefit. If a vehicle has very limited private use, the FBT cost may be zero, even if the car is occasionally taken home by employees.

There is also welcome news for businesses considering greener fleets. The formula for calculating FBT will be amended to result in lower FBT for electric and hybrid vehicles, reflecting their lower running costs and removing the current cost disincentive.

However, there is an important caveat. The simplification of the rules is expected to result in more active enforcement by Inland Revenue. The current complexity has led to widespread non-compliance, particularly around the misconception that all utes automatically qualify for an exemption. With clearer rules in place, Inland Revenue will have a stronger basis for policing compliance.

What you should do: Review your current vehicle fleet arrangements. If you have been relying on complex logbook systems, prepare for a simpler approach from April 2027. If you are considering fleet upgrades, factor in the upcoming FBT advantages of electric and hybrid vehicles.

Foreign Investment Fund Rules Made Fairer

The Foreign Investment Fund (FIF) regime has long been a source of frustration for New Zealanders investing offshore. The rules can result in tax being payable on unrealised gains, meaning investors face tax bills even when they have received no actual income.

Budget 2026 addresses this in two important ways.

First, the de minimis threshold is increasing from $50,000 to $100,000. If your offshore investments (excluding listed Australian shares) cost less than $100,000, you will no longer need to apply the complex FIF calculation methods. You will still be taxable on dividends when they are received, but the annual compliance burden is removed.

Second, the Revenue Account Method (RAM) is being extended to all New Zealand taxpayers, including natural persons and family trusts. Previously, this method was only available to new migrants and returning New Zealanders. Under the RAM, you are taxed on dividends received and 70% of any realised gain when you actually sell an unlisted foreign share. This means no more tax on paper gains you have not yet received.

What you should do: If you hold foreign shares, contact us to review whether you fall under the new $100,000 threshold or whether electing into the RAM methodology would reduce your tax burden.

R&D Tax Incentive: Cash Flow Boost, but a Software Cap

Reduction

Businesses investing in research and development will benefit from the introduction of in-year quarterly payments under the Research and Development Tax Incentive (RDTI).

Currently, businesses must wait until the end of the tax year to receive their tax credit. The new quarterly payments will improve cash flow for start-ups and R&D- intensive businesses by providing support throughout the year.

Inland Revenue will also be granted greater flexibility to accept late RDTI returns and correct minor administrative errors, reducing the risk of losing entitlements due to paperwork issues.

However, there is a significant trade-off. The cap on eligible internal non-administrative software expenditure is being reduced from $25 million to $3 million per year. This change is aimed at ensuring the tax credit rewards R&D that generates wider benefits, such as new knowledge and technology, rather than internal systems development. Businesses with substantial internal software projects should assess the impact of this reduction.

What you should do: If your business claims the RDTI, contact us to discuss the new in-year payment option and to assess whether the reduced software cap affects your claims.

Most changes apply from the 2027–28 income year.

Engaging Offshore Contractors Just Got Easier

If your business engages non-resident contractors, you will know that the Non-Resident Contractors Tax (NRCT) rules can be difficult to navigate. Budget 2026 proposes meaningful simplification from 1 April 2027.

The exemption threshold is increasing from $15,000 to $75,000 in a 12-month period. This means that if you engage an offshore contractor for a project worth less than $75,000, you will have significantly reduced withholding obligations. Additionally, a new "single-payer" approach means you only need to consider your own contract with the contractor, rather than trying to assess their wider New Zealand activity.

What you should do: If you regularly engage offshore contractors, these changes may materially reduce your compliance burden. We can help you review your arrangements ahead of the April 2027 implementation.

Warning: Shareholder Loans Under Scrutiny

Business owners operating through company structures should take note of a new integrity measure. Under the proposed rule, if a company makes a loan to a shareholder and that loan remains unpaid six months after the company is liquidated or removed from the Companies Register, the outstanding amount will be treated as taxable income to the former shareholder.

The Government's rationale is straightforward: if a loan will never be repaid, it is effectively income and should be taxed accordingly.

What you should do: If you have an overdrawn shareholder current account, particularly if you are considering winding up your company, seek professional advice now. We can help you understand the tax consequences and explore options to manage any exposure.

Inland Revenue Has More Resources to Chase You

Perhaps the most significant operational change in Budget 2026 is the allocation of an additional $15 million per year to Inland Revenue for audit, compliance, and debt collection.

This investment is expected to return $3 for every dollar spent, and the Government has noted that initial compliance investments have already contributed to approximately $3 billion in overdue tax being collected in the current year.

For businesses, this means increased scrutiny of GST returns, PAYE reporting, provisional tax obligations, and existing payment arrangements. If you have outstanding tax debt or have been less than diligent with your filings, the risk of enforcement action has materially increased.

What you should do: Ensure all tax filings are accurate and submitted on time. If your business has outstanding tax debt, contact us immediately. We can help you engage proactively with Inland Revenue to establish a payment arrangement before enforcement action escalates.

Donation Tax Credits Capped

From 1 April 2027, the maximum amount of donations eligible for the 33.33% tax credit will be capped at $100,000 per year. This means the maximum annual tax credit an individual can claim will be $33,333.

Currently, there is no upper limit.

This change affects approximately 350 donors nationally and is aimed at curbing aggressive tax planning involving donor-controlled charities. It is important to note that corporate donations are not affected by this cap.

On a positive note, the Budget also introduces the ability to claim donation tax credits throughout the year (from 1 April 2028) and to gift tax credits directly to charities.

What you should do: If you make significant charitable donations, review your giving strategy ahead of April 2027. If you donate through a company, your deductions remain uncapped.

Working for Families: More Support for Self-Employed Families

Self-employed individuals with dependent children who receive Working for Families will benefit from a temporary $50 per week increase to the In-Work Tax Credit for the 2026/27 year, taking it from $97.50 to $147.50 per week. The abatement threshold has also increased from $42,700 to $44,900 from 1 April 2026, meaning more families will qualify for higher payments.

What you should do: Ensure your estimated family income is accurately recorded with Inland Revenue to prevent end-of-year overpayment debt.

Key Dates at a Glance

How We Can Help

Budget 2026 presents both opportunities and risks for business owners and self-employed individuals. Whether you need to review your vehicle fleet arrangements, assess your foreign investment portfolio, manage an overdrawn shareholder account, or ensure your tax affairs are in order ahead of increased Inland Revenue enforcement, our team is here to help.

Contact Greenlane CA Limited

• Email: info@glca.co.nz

• Phone: +64 9 522 5182

• Website: www.glca.co.nz

• Address: 97 Great South Road, Epsom, Auckland

Disclaimer: This article is published by Greenlane CA Limited for general informational purposes only. It does not constitute professional tax, accounting, legal, or financial advice.

Readers should not act or refrain from acting based solely on the information in this article without first seeking professional advice tailored to their specific circumstances. Tax laws and regulations are subject to change.