2025 Tax Newsletter

Disclaimer: This blog is intended as a general guide and may not cover all specific situations or reflect the latest legislative changes. For personalised advice tailored to your unique circumstances, consult a qualified tax professional.

This newsletter will provide information for the 2025 financial year (1st April 2024 to 31st March 2025) and the upcoming 2026 financial year (1st April 2025 to 31st March 2026) to ensure you are up to date with any key tax changes that may affect you. Please note that all content in this newsletter and on our blogs should be supported by specific accounting advice tailored to your situation.

Scam Alert

There has been a significant increase in scam emails pretending to be from the IRD. These often use the IRD logo and encourage you to click a link to claim a refund. We handle all IRD correspondence for our clients and will notify you if there’s a genuine refund. If in doubt, please call or email us before taking any action.

Individual Tax Rates (Post July 2024)

Below shows the updated individual tax rates. Please note that these have been adjusted partway through a financial year, so the 2025 Y/E rates consist of composite rates. If you would like to see how much tax you pay based on the 2025 or 2026 tax year you can visit our tax calculator tool on our website. This is a great tool when budgeting for tax in your initial years of trading or when there has been significant fluctuation in income levels causing provisional tax to be inaccurate.

GST Threshold

The GST threshold remains at $60,000 of revenue – this is not your bottom-line profit. Due to bracket creep this is pushing more and more sole traders into the GST threshold. Please monitor your sales closely; if it looks like you’ll exceed $60,000 within any 12-month period, get in touch so we can guide you through GST registration. If you exceed the threshold but fail to register, the IRD can backdate your registration date and charge late payment penalties along with use-of-money interest. You would also miss out on charging GST (15%) on your prices during that time, potentially leaving you out of pocket. You can voluntarily register for GST at any stage, even before reaching the threshold. We strongly recommend being proactive to avoid any unwanted surprises.

Companies

All Income left in the company: 28%

The 28% company tax rate may seem appealing compared to the highest individual tax rate of 39%. However, profits not allocated to shareholders are retained in the company as retained earnings, taxed at 28%, and will eventually need to be paid out as dividends when closing the company. Imputation credits at 28% will be attached to these dividends, but any additional personal tax liability above this rate must still be paid.

Trusts (2025 Financial Year onwards)

All Retained Trust Profit: 39%

Note – Trust income allocated to beneficiaries over the age of 16 is taxed at the beneficiaries’ personal tax rate. Trust income NOT allocated to beneficiaries over the age of 16 or left in the trust is taxed at the Trust tax rate of 39%.

This rate has changed from 33% to 39% in the 2025 tax year to mirror the highest individual tax bracket. Note that this is only the profit left in the trust and not allocated to beneficiaries. You are still able to discretionarily allocate income to beneficiaries at lower individual tax rates.

Inland Revenue Use of Money Interest (UOMI) and Penalties

Use of Money Interest

Inland Revenue charges use-of-money interest (UOMI) on underpaid tax amounts to encourage accurate tax payments throughout the year. Companies, trusts, and individuals with residual income tax exceeding $60,000 are subject to UOMI—even if they are already paying provisional tax. The current UOMI rate (as at March 2025) is 10.88%. Any UOMI paid to Inland Revenue is deductible as an expense for tax purposes but only when the outstanding tax is paid in full.

Penalties

Penalties can be charged at the discretion of the IRD for late payments or incorrect returns. Penalties are not able to be deducted as an expense.

Best Practice to avoid UOMI and Penalties

UOMI and penalties can be costly, so the best practice is to regularly monitor projected profits and set aside sufficient funds to meet your tax obligations. This is particularly important during periods of significant income fluctuation, as provisional tax payments may not cover the full amount of terminal tax due, leading to unexpected cash outflows. Providing your accounts to us promptly in these situations helps ensure accuracy and gives you a clear picture of upcoming liabilities well before payment deadlines.

KiwiSaver

Currently an employer is required to contribute 3% of an employee’s gross salary if the employee is a member of a Kiwisaver Scheme. However, you can choose to increase your contribution to 4%, 6%, 8% or 10%. If you are a sole trader or shareholder you can contribute to KiwiSaver at your discretion.

Student Loan Threshold

Student loan repayments will be triggered if income is over $24,128 ($464 per week) in the 2025 and 2026 financial year end. This means that $1 the individual with a student loan earns over $24,128, 12 cents is repayable on their student loan. This is automatically deducted for PAYE wage earners but can further be triggered when we distribute income, primarily through Trusts to beneficiary children. The tax saving of a beneficiary at a lower tax rate should be weighed up against the lump sum repayment cost on student loan distributed to the beneficiary – often it is still advantageous to allocate this income but requires further analysis. We will not distribute this income to a beneficiary with a student loan unless we think there is a considerable tax advantage and at that point we will consult with you.

Often there is a small round up on wages at year end or if you have other sources of employment income without student loan deductions. Please note we do not send tax reminders for student loan repayments so you should keep an eye on upcoming payments through your MyIR.

Ring-Fencing Rules for Residential Rentals

If you make a loss on residential rental property, you can’t use that loss to offset other income like salary or business profits. It can only be used to offset other residential rental income. This is a common misconception we see. If you don’t have any other rental income in the current year, the loss will be carried forward indefinitely to offset future residential rental profits.

Bright-line Residential Property Rule

Catch-All Provision

If you regularly buy and sell property for profit, the gain is almost always taxable. This is because the activity meets the criteria for a taxable business. To protect yourself:

• Make your long-term intentions clear when purchasing.
• Keep records and correspondence showing you’re not simply “flipping” for short-term gain.
• Consult with us before buying property if you’re uncertain of any potential tax liability.

The 2-Year Bright-Line Rule and Exemptions

• If you sell a property (other than your main home, inherited property, or a deceased estate) within 2 years, any profit is taxable.
• If you incur a loss on a residential property sale that’s subject to the bright-line rules, the loss can only be offset against profits from other bright-line property sales. You cannot use these losses to offset regular rental income. Any excess bright-line losses will be carried forward indefinitely until bright-line profits occur.

Best Practice:

• Track all property-related expenses (e.g., renovations, legal fees, commissions) even if you plan to hold the property beyond 2 years.
• Don’t let the bright-line timeframe alone dictate when to sell—your actual tax liability could be minimal once allowable costs are deducted.
• If in doubt, speak with us. We’re here to help you minimise your tax burden and avoid unexpected surprises.

Interest Deductibility on Residential Rental Properties

Good news for rental property investors impacted by interest deductibility changes.

If you have been facing more tax to pay due to limits on claiming interest expenses, tax relief is on the horizon. For the 2025 tax year, ending 31 March 2025, investors will be able to claim 80% of interest expenses on existing residential rental properties. From the 2026 tax year, ending 31 March 2026 onwards, 100% interest deductibility will be restored. This change represents a significant tax saving for many investors.

New builds remain unaffected, as they continue to qualify for full 100% interest deductibility. A property is considered a new build if the Code Compliance Certificate was issued on or after 27 March 2021.

Working for Families (WFF) Tax Credits Thresholds (Income tested)

Working for Families (WFF) Tax Credits and In-Work Tax Credits are available to families whose total family income falls below the following annual or weekly income thresholds for the relevant period.
Note: Joint family income and taxable income may differ, as family income includes a broader range of financial sources.

If you receive a fixed wage, it’s easy to check your eligibility based on the weekly income limits. However, if you’re a sole trader or shareholder with fluctuating income, your actual eligibility can only be confirmed at the end of the financial year. For this reason, it’s often safer to choose the end-of-year lump sum payment—especially if you don’t need the extra cashflow throughout the year. This helps avoid the risk of having to repay amounts later if your final income ends up higher than expected.

Income Thresholds for Entitlements (1 April 2025 – 31 March 2026)

Best Start Tax Credit

The Best Start Tax Credit provides financial support for newborns and young children.

• First Year: Not income tested. All families receive $73 per week from birth until the child turns one.
• Ages One to Three: Income-tested based on the thresholds below.