Election Tax Policies, part four

By Robyn Walker

With the 2026 Election drawing nearer, the flood of new campaign policies is starting to slow. In the final part of our series on election tax policies, we summarise the latest announcements and provide an overall summary of the tax proposals most likely to affect businesses if implemented.

With left-leaning parties getting out early with the most substantial proposals to introduce new taxes (refer to part one for the Green Party and The Opportunity Party, part two for the Labour Party, and part three for Te Pāti Māori), this article focuses on the parties making up the current coalition government. These parties are not proposing new taxes, but nevertheless are offering some tax proposals.

The National Party

“No new taxes” is one of the National Party’s main campaign pledges, with the focus being on financial discipline to deliver the services that New Zealand needs and repay debt, rather than seeking new sources of revenue. While there are no new taxes proposed, there is also no tax relief on the cards until the government books are back in surplus. The National Party fiscal plan effectively acknowledges that fiscal drag will be part of the way surpluses are achieved.

From a business perspective, the National Party has proposed a comprehensive 47-point plan to support small businesses, some aspects of which will have an equal impact on large businesses. Tax reform is not part of this plan, but it does propose a review of whether the current $60,000 GST registration threshold is still fit for purpose. The plan also commits to retaining Investment Boost, allowing businesses to continue claiming an upfront 20% deduction for the cost of new assets. Both the Labour Party and the Green Party have committed to repealing Investment Boost to fund other priorities.

While not strictly a tax issue, the National Party proposes increases to KiwiSaver contribution rates. Current employee and employer contribution rates will increase by 0.5% per year until they reach 6% each in 2032. Other proposals include making KiwiSaver compulsory for all workers from July 2028 and making employer contributions for employees aged over 65 compulsory from July 2027. Self-employed individuals would need to make contributions from July 2028.

While not technically part of the National Party election policies, in the current term the government has been focused on tax reform to attract and retain talent, support small businesses, simplifying the tax system and improving social policy. The Minister of Revenue, Hon Simon Watts has just released the government tax and social policy work programme for the coming year, which shows the work stream priorities (subject of course to the outcome of the election).

ACT Party

In prior elections, the ACT Party could be relied on to propose lower tax rates, but that is not the case in this election. The focus is on reducing spending and the size of government to create the conditions in which tax reform is possible. However, there are still some tax proposals on the table that will appeal to different constituents.

KiwiSaver

Rather than proposing changes to what goes into KiwiSaver accounts, the ACT Party is campaigning to change the taxation of investments once they are in KiwiSaver or a non-KiwiSaver superannuation scheme. Retirement savings can be broken into three components: money going in, investment earnings and money going out. New Zealand currently taxes money going in, taxes investment earnings and exempts money returned to the saver at retirement. Most other OECD countries have more concessionary regimes, allowing pre-tax income to go in, exempting investment earnings from tax, but taxing the end result when savings are withdrawn. These two systems are known as TTE and EET respectively, or Taxed-Taxed-Exempt and Exempt-Exempt-Taxed. The ACT Party is proposing that New Zealand move from TTE to TEE by providing a tax exemption for investment earnings inside KiwiSaver funds. The benefit is that investment earnings will be higher and, through compounding, New Zealanders will have much higher savings when they reach retirement. The ACT policy includes a few examples showing that this simple change can have a significant impact on the growth of retirement savings. Tax exemptions come at a cost, but this will be partially offset by removing what remains of the annual government contribution, currently $260.72 for those earning less than $180,000.

The proposed change to KiwiSaver essentially puts retirement savings on the same footing as owner-occupied housing, which is purchased using post-tax income but thereafter remains exempt from tax so long as there is no comprehensive capital gains tax. The last Tax Working Group considered whether the tax settings should be changed for retirement savings and concluded that, if there were to be changes, they should be targeted towards low-income earners, such as by exempting employer contributions from ESCT for employees on low incomes or reducing portfolio investment rates (PIRs) for lower-income earners. The analysis for the Tax Working Group considered that a change from TTE to EET could be costly and regressive:

“…[TEE] would substantially increase [KiwiSaver savings] attractiveness, and so would attract much more diversion of savings into them, potentially attracting almost all forms of financial savings. If no limits were put on contributions, the fiscal costs would be much higher, and would flow almost entirely toward wealthy households. Under an EET or a TEE scheme, it would be likely that many older and wealthier households would pay very little tax on their investment income. Under either an EET or a TEE scheme, putting tight limits on KiwiSaver balances would be necessary, but then the goal of attracting more savings into KiwiSaver wouldn’t be achieved. The looser the restrictions on investing into an EET or TEE KiwiSaver, the higher the fiscal cost and the more regressive the distributional outcome will be.”

Donation Tax Credits

While the ACT Party supported capping donation tax credits as part of Budget 2026, it now proposes to scrap the cap and once again allow unlimited donation tax credits. This change will be popular with the charitable sector, which has been vocally opposed to the change since it was announced. This policy change complements the ACT Party’s proposal to develop a National Cancer Centre, funded in part by philanthropic gifts.

Cryptocurrency

The ACT Party has a full policy on “unlocking the digital economy” and, as part of this, proposes reforms to reduce the tax burden on cryptocurrency. The proposal is to have clear legal and tax rules, including for stablecoins, a 12-month bright-line test for long-term personal investment, and a tax exemption for low-value purchases made using digital assets.

Software

The tax treatment of software is something which can be unnecessarily confusing. Recognising this, the ACT Party proposes to modernise the treatment of software so that costs can be deducted on a clear and consistent basis regardless of how the software investment is made. 

Residential rental loss ring-fencing

Residential property investment has been subject to a number of reforms in recent years, with the highest-profile change being the move to prevent landlords from deducting interest costs and the subsequent reversal of that change by the current government. Before interest deductions were denied, landlords became subject to residential rental loss ring-fencing rules in 2019. These rules have meant that, if a property owner makes a ‘tax loss’, in most cases it is not possible to offset that loss against non-rental sources of income. The ACT Party proposes to repeal these rules and allow losses to once again be offset. It is forecast that this change will cost close to $300 million per annum. This change is most relevant to taxpayers who hold residential property in their individual names. Recent Inland Revenue data indicates that 263,700 individuals own residential rental properties and, of those, 96,690 had a current-year loss in the 2024/25 income year. The average rental loss was $11,510.

New Zealand First

Recognising that New Zealand has a high number of small and medium-sized enterprises (SMEs), New Zealand First proposes to introduce a differential company tax rate whereby businesses with turnover under $30 million would be subject to a 20% company tax rate, with all other companies retaining the 28% rate.

The rationale is to encourage more investment. A lower company tax rate encourages money to be left in the business, where it can be reinvested, for example in new assets, or used to reduce reliance on debt. The estimated fiscal cost of this change is $1 billion.

The proposed change is similar to the approach taken in Australia, where businesses with turnover of less than A$50 million are eligible for a 25% company tax rate, while larger businesses are subject to a 30% rate.

While the idea of a lower company tax rate is appealing, a differential rate would add complexity and have behavioural implications due to the high level of additional tax payable when company profits are ultimately distributed to shareholders and taxed at rates of up to 39%. The OECD recently issued a report on enhancing corporate tax systems and noted the following points about differential tax rates:

• A lower rate can support cash flow; however young/growing firms may be in a tax loss position, meaning that a lower rate does not provide any assistance.
• Differential rates create a growth threshold problem, with businesses incentivised to stay below the threshold. This can result in businesses constraining growth or encourage businesses to split into multiple entities below the threshold.
• Medium-sized firms around or above the threshold are disadvantaged by the sudden jump in rates, which can discourage scaling.

New Zealand First also proposes changes to KiwiSaver, including making enrolment compulsory from birth, with children receiving a $1,000 contribution. KiwiSaver would become compulsory for all workers, with employer and employee contributions set at 8% before increasing to 10%.

Conclusion

Taxes have taken up a material part of the 2026 election campaign, but the competing policies reflect fundamentally different objectives. Our table below provides a high-level summary of what has been proposed (and covered in more detail in this series of articles). Current opposition parties propose broader taxation of capital, wealth and higher incomes to fund redistribution and public services, while the current coalition parties favour spending restraint, targeted concessions and measures intended to support investment and savings. For businesses, the election outcome could determine not only the amount of tax paid, but also the treatment of investment, property, retirement savings and business growth. With several proposals carrying significant fiscal, distributional and administrative consequences, implementation detail will matter as much as the headline policy.

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