New Zealand’s Budget 2026 sets out the government’s plan to return the country to a fiscal surplus by 2028/29 while delivering targeted support for families, simplifying business tax compliance, and introducing a range of tax measures affecting charities, companies, and the Working for Families scheme.
The New Zealand Government delivered Budget 2026 to Parliament on 28 May 2026, with Minister of Finance Nicola Willis outlining a strategy aimed at restoring a fiscal surplus by the 2028/29 financial year. To implement the budget proposals, the Taxation (Budget Measures) Bill (No. 3) was introduced on the same day.
The Budget emphasises fiscal discipline and responsible spending as the government seeks to manage national debt while responding to global economic uncertainty and domestic pressures, including rising infrastructure costs. At the same time, it prioritises investment in frontline services such as health, education, and law and order, alongside measures to strengthen national security, improve energy resilience, and reform housing policy.
Business tax and compliance reforms
A number of business-focused measures are included in Budget 2026.
The government is simplifying Fringe Benefit Tax (FBT) rules relating to private motor vehicle use by replacing detailed logbook requirements with a more flexible compliance approach intended to reduce administrative costs.
The Taxation (Budget Measures) Bill (No. 3) also introduces changes affecting shareholder loans. Under the new rules, where a company is removed from the Companies Register and an outstanding shareholder loan remains unpaid, the shareholder, director, or close relative will be treated as having had the debt discharged six months after deregistration. This treatment will trigger a base price adjustment under the financial arrangement rules. The measure applies to companies removed from the register on or after 4 December 2025.
In addition, a new prudential levy will be imposed on banks, insurers, and other financial institutions to fund the costs of regulation and supervision. The levy is expected to recover NZD 209 million over the forecast period.
Changes affecting charities and not-for-profit organisations
The Budget introduces several measures affecting charities and not-for-profit entities.
The amount of net income that a not-for-profit organisation can earn before becoming subject to tax will increase from NZD 1,000 to NZD 10,000. Membership subscriptions and levies received by not-for-profit organisations will continue to be treated as non-taxable income.
To improve the long-term sustainability of the charitable donations regime and reduce tax planning risks, a new annual cap of NZD 100,000 will apply to gifts eligible for the donation tax credit. Based on the current credit rate of 33â…“%, the maximum annual tax credit available will be NZD 33,333.33. The measure will apply to monetary gifts made on or after 1 April 2027.
Aircraft leasing tax exemption introduced
The Bill introduces an income tax exemption for income earned by non-residents from the dry leasing of aircraft and aircraft parts.
A dry lease arrangement is one in which the lessee is responsible for providing the crew, maintenance, and insurance. Income from such arrangements will be exempt from New Zealand income tax and will also fall outside the scope of non-resident contractors’ tax (NRCT).
The exemption applies from 1 April 2026 and is intended to reduce barriers for New Zealand businesses leasing capital-intensive aviation assets.
Support measures for families and individuals
Budget 2026 includes several initiatives designed to assist households and lower-income earners.
The government has funded a temporary increase of NZD 50 per week to the In-Work Tax Credit, a measure expected to benefit up to 157,000 low- to middle-income working families.
Accommodation Supplement rates will increase nationwide to provide additional support for lower-income private renters. At the same time, social housing tenants will see the proportion of income paid toward rent rise from 25% to 30%.
Changes are also being made to Temporary Additional Support payments, with the maximum payment rate being reduced to better align with the programme’s role as a last-resort hardship assistance measure.
Simplification of the Working for Families Scheme
The Bill contains a series of changes designed to simplify the Working for Families (WFF) scheme and reduce complexity for recipients.
Several low-risk income adjustments will be removed from family scheme income calculations, including overseas pensions and certain salary or wage income exempt under international agreements. Various other adjustments are also being repealed, including those relating to retirement scheme contributions, specific historical depreciation losses, and deposits or refunds from the main income equalisation account.
The threshold for “other payments” adjustments will increase from NZD 5,000 to NZD 8,000, while certain income adjustments will be able to be introduced through an Order in Council.
Residence requirements are also being streamlined. To qualify, both the principal caregiver and dependent child must ordinarily reside and be physically present in New Zealand. A six-week overseas travel exemption will be available before eligibility ceases, with longer absences permitted in specified circumstances, including government service, overseas medical treatment, and crisis events such as pandemics or natural disasters.
Student loan and administrative amendments
The Bill also makes a number of administrative changes.
Certain powers relating to amendments of tax-exempt statute lists will be transferred from the Tax Administration Act 1994 to the Student Loan Scheme Act 2011. In addition, Schedule 38 of the Income Tax Act 2007, which contains provisions relating to statutes exempting income, will be repealed and its contents relocated to the Student Loan Scheme Act 2011.
Legislative changes required
The Taxation (Budget Measures) Bill (No. 3) gives effect to these measures through amendments to the Income Tax Act 2007, the Student Loan Scheme Act 2011, and the Tax Administration Act 1994.
Together, the measures form a key component of Budget 2026’s broader objective of strengthening economic security, supporting households, reducing compliance burdens, and maintaining the sustainability of New Zealand’s tax system while pursuing a return to fiscal surplus.
