Budget 2026

The treasury forecasts were more upbeat than many expected forecasting a return to surplus in 2028/2029, this is a year earlier than predicted in December. However, these forecasts also suggest unemployment and inflation rising in the June quarter, meaning things will get worse before they get better.

From a tax point of view budget 2026, included:

• A new prudential levy on banks and insurance companies.
   
• Changes to tax rules for Charities and not-for-profits, including ensuring membership subscriptions and levies are not taxed, increasing the income threshold to $10,000 before a not-for-profit is taxed and also imposing a $100,000 cap per year on eligible donations and thereby limiting the donations tax credit.
   
• Simplifying FBT on motor vehicles by removing the need for detailed records. This would see the work-related vehicle definition removed and vehicles categorised into one of 6 categories with different FBT implications. Interestingly it includes a “vehicles mainly for business use and used to support farming operations” category to address the political fallout from the original proposals.
   
• Changes to Foreign Investment Fund (FIF) rules including expanding options so people are not taxed on unrealised gains and increasing the threshold to $100,000 before the regime applies. There are also changes to the financial arrangement rules to support migrants.
   
• Changes to the R&D tax credit to ensure it is well targeted.
   
•  $15m for IRD to further focus on debt recovery.
   
• Changes (clarification) to shareholder loans meaning if the company is liquidated amounts owing by the shareholders are treated as income.
   
• Changes to Non-Resident Contractors tax, by increasing the threshold before it applies to $75,000 (previously $15,000), and reducing some of the compliance burden.

Unusually Budget 2026 included a large number of tax changes so there is a bit to digest. If you would like more information on any of these changes, please contact us.