Hon Nicola Willis
Minister of Finance

The Government is removing tax roadblocks to investment, Finance Minister Nicola Willis says.

“Budget 2025 sets aside $75 million over the next four years to encourage foreign investment in New Zealand infrastructure and make it easier for startups to attract and retain high quality staff.

“These changes demonstrate the Government’s commitment to driving the economic growth needed to create jobs, lift incomes and fund public services New Zealanders rely on.

“Low capital intensity and low rates of foreign direct investment are key contributors to New Zealand’s relatively low rates of productivity.

“To generate growth, New Zealand needs more foreign investment and the international know-how it brings with it. It also needs rules that make it easier for enterprising new businesses to get established.

“Presently, New Zealand’s thin capitalisation rules limit the amount of tax-deductible debt that foreign investors can put into New Zealand investments. The purpose of these rules is to prevent income being shifted offshore and to protect New Zealand’s tax base.

“However, there is a risk that the rules may be deterring investment, particularly in capital-intensive infrastructure projects that are typically funded by large amounts of debt. We need to strike a balance.

“Therefore, the Budget sets aside $65 million for a change to the rules, pending the outcome of consultation on the details.

“The Budget sets aside another $10 million to defer tax liability of some employee share schemes to help startups and unlisted companies.

“Currently, problems arise if tax bills for share income arrive when employees are unable to realise the value of their shares. The changes we are making will allow tax to be deferred until a liquidity event, such as the sale of the shares, occurs.

“These changes come on top of work under way to modernise and reduce compliance costs associated with fringe benefit tax rules and further adjustments to the foreign investment fund residence and other rules to make New Zealand a more attractive destination for migrants and digital nomads.

“To shift onto a faster growth track, New Zealand needs to make it easier for businesses to access capital and talent.”

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