TaxationNZ Archives | Edmonds Judd

Budget 2026

June 3, 2026

Government & Policy, Infrastructure & Development, Public Sector, Social Welfare Law, Wealth & Retirement Planning

Securing New Zealand’s future says the Minister of Finance

Despite pre-Budget announcements for the health, education and defence sectors, this Budget certainly contained some meaty content.

The government’s broader approach could therefore be characterised as a ‘meat and veg now, dessert later’ strategy to economic management.

With a net operating package of an average $2.146 billion pa ($8.272 billion over the next four years), the health sector is a major winner, followed by education (including tertiary), defence and intelligence, law and order, etc totaling new expenditure of $14.666 billion over the next four years.

On the other side of the coin, the Minister has anticipated savings of $6.394 billion over the next four years, making the net package of spending of $8.272 billion over the same period.

Health

A $5.5 billion increase in funding for frontline health services
Funding for three-day postnatal stays ($34 million) and $16 million allocated to specialist paediatric palliative care
Pharmac has additional funding ($54 million) to buy more medicines
$682 million for capital investment includes a new tower block for Whangārei Hospital, redevelopment at Palmerston North and Hawke’s Bay Regional Hospitals, and
Funding to lower the eligibility age for free bowel screening from 58 years to
56 years; benefitting 200,000 Kiwis.

Education

The government’s aim is to lift student achievement in schools. The cancellation of the final year fees-free initiative will help fund preparing young people for trades and other vocational education. The main points are:

$131 million to help students meet standards for the three Rs (reading, writing and arithmetic)
Supporting the refreshed curriculum and new national qualifications implementation
Continuing the Healthy School Lunches Programme
Doubling the number of trades academy places providing free trades training for year 11-13 students, and
Around 230 new classrooms will be built, and there is a funding increase for school property maintenance and daily operations.

Defence and foreign affairs

Increased funding to retain current defence force staff levels, as well as increasing numbers in key areas
$110 million for international development cooperation, with particular focus on the Pacific, and
More funding to enable aircraft, ships (including keeping our two Anzac-class frigates ship-shape) and land forces to continue to operate.

Social housing and welfare

Increasing the accommodation supplement for people in private rentals, and increasing income-related rents for people in social housing
Funding for up to 2,250 additional social houses
More case management help to support solo parents into work, and
$45 million for extended community food support and children’s breakfast programmes.

Infrastructure

The government acknowledges that New Zealand’s current infrastructure must be not only be maintained, but also expanded through new investment.

The construction of the Cambridge to Piarere Expressway
Renewing and upgrading the rail network, particularly in Auckland and Wellington
Financial incentives to councils to encourage housing growth
Investment in hospitals, schools, courthouses, police stations and defence assets, and
Funding to drive the reforms to the resource management system.

These investments are in addition to previously approved current and pipeline projects.

Law and order

The government’s focus is to reduce crime and keep New Zealanders safe. Proposals include:

$503 million for frontline Corrections services
More support ($50 million) for frontline policing
Funding to reform the firearms safety system, and
$21 million for Customs to combat drug smuggling and transnational crime.

Fuel response

New Zealand is currently facing unprecedented pressure on its energy supplies resulting from the hostilities in the Middle East. The government will introduce:

A $50/week increase to the In-Work Tax Credit for up to a year to help working families with increased fuel costs
Funding for additional strategic fuel reserves to firm-up the country’s fuel resilience, if required
A temporary increase in mileage rates for support workers and people travelling for specialist treatment
Additional funding for Fire and Emergency, Corrections, Policy, Customs and Education to maintain frontline activities during this period, as well as
A $450 million contingency fund for future fuel-related costs.

Energy security is now top-of-mind in this current uncertain fuel climate. The government proposes:

Capital investment in Genesis Energy to accelerate the development of new generation and firming capacity, and
A new loan guarantee scheme to support businesses to transition away from the use of gas.

Public service

The proposed cuts to the public service have already been announced, and the reception has been mixed. The government wants to see improved productivity and greater efficiency to reprioritise frontline services while reducing the public service headcount.

Other initiatives include:

$200 million will be raised by a new tax on banks to help cover Reserve Bank costs
Rules will be changed to tax loans made by companies to shareholders that remain outstanding six months after the company is removed from the Companies Register
Stricter regulations for charities: a limit of $100,000 has been set for people claiming tax deductions for making charitable donations
More funding to control the dratted wilding pines
$184 million for Oranga Tamariki to protect and support children
Fringe Benefit Tax rules for private motor vehicles will be simplified
Making the SuperGold Card an official form of ID, and
Funding for new technology to improve our emergency management system.

NZ Superannuation

A vexed topic for any political party. Although not covered in the Budget, with the ballooning costs of National Super (projected to be $31.2 billion in 2030), all recent governments have grappled with future funding. Raising the age of entitlement, albeit slowly, and means testing are only two of the many measures proposed to alleviate the pressures on government funds. It is clear that the funding of NZ Super is a major issue and will need to be strongly addressed in the near future.

Overall the government hopes the Budget funding will lead to an increased GDP and a healthier economic environment.

To read the Budget in more detail, click here for the Minister’s Budget speech. The Treasury’s website, click here, is also very helpful.

If you would like to discuss more about the government’s proposals, please don’t hesitate to contact us.

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Content Copyright © NZ LAW Limited, 2026. Editor: Adrienne Olsen. E-mail: [email protected] Ph: 029 286 3650

Taxing the business income of charities

February 26, 2026

Charities & Not-for-Profits, Government & Policy, Regulatory Compliance, Taxation, Trusts & Legal Governance

Inland Revenue proposal unlikely to proceed

In February 2025, Inland Revenue issued a paper entitled ‘Taxation and the not-for-profit sector’ (the Issues Paper).

Among other things, the Issues Paper proposed taxing the business income of charities, where that income did not relate to their charitable purposes. This was highly controversial and resulted in a flurry of submissions.

Charities in New Zealand

Section 5 of the Charities Act 2005 defines ‘charitable purpose’ as including ‘every charitable purpose, whether it relates to the relief of poverty, the advancement of education or religion, or any other matter beneficial to the community.’

From time to time, public debate arises over organisations that have been granted charitable status, particularly where that status is seen as controversial. For example, Greenpeace has gained and lost charitable status a number of times, and Family First has had charitable status declined by the Supreme Court. After serious allegations of abuse and law-breaking, Gloriavale’s charitable status is under review.

One charity in New Zealand has been controversial for some years. Sanitarium, the company that makes Weet-bix and other breakfast cereals, is owned by the Seventh-day Adventist Church.

As a general rule, where a charity owns a business, and receives business profits, tax does not need to be paid on those profits, because they are being distributed to a charity which can only use them for charitable purposes. This tax exemption was closely scrutinized by Inland Revenue in the Issues Paper.

Taxing business income

The Issues Paper suggested that businesses owned or operated by charities have certain competitive advantages over non-charitable businesses. These businesses:

Can accumulate funds without paying tax, and therefore invest in and grow their businesses faster, and
May not face the same compliance costs as tax-paying businesses.

This led to Inland Revenue’s proposal to tax charities’ business profits where they were not related to the charitable activities in question.

The charitable sector argued that it would be very difficult to identify what business activities were related to furthering a charitable purpose and what activities were unconnected.

The Salvation Army’s thrift stores might remain untaxed, but what about Sanitarium’s production of healthy breakfast cereals? Sanitarium might argue that it provides free healthy breakfasts in more than 1,400 schools as part of the overall charitable endeavours of the Seventh-day Adventist Church. (It might also make the point that John Kellogg invented cornflakes in the late 1800s because he believed that eating bland breakfast cereals facilitated godly morality.)

More specific counterarguments were also made in submissions. Charities said that they faced a number of competitive ‘disadvantages’ which for-profit businesses did not face; these include a limited ability to raise finance and differences in their ability to claim imputation credits. Any advantages their businesses might enjoy were offset by disadvantages.

Submissions also said that where business profits were taxed and then distributed to the charity which owned the business, they would always have to be used for charitable purposes, and a tax credit would need to be given to the charity in due course. It was argued that it would be time-consuming and costly (for both the charities and Inland Revenue) to make a tax payment and later receive a credit in respect of the same funds.

A number of charities also said that they face much greater compliance costs than small businesses. They have, for example, much more stringent audit requirements; if the law changed, there might need to be an income threshold whereby small charities are exempted from having to distinguish between types of income earned.

Sue Barker, a well-known tax and charities lawyer, said that the Issues Paper did not start by asking the fundamental question of whether there is a problem in the charitable sector regarding the payment of business income tax? If charities are misusing funds and not using them for charitable purposes, this would justify more scrutiny over charitable activities and perhaps better enforcement of existing laws, but it would not justify a law change.

Government response

Recently, Revenue Minister, Simon Watts confirmed that Inland Revenue is unlikely to pursue the proposal to tax charities’ business income. He suggested that there might be more scrutiny over the way charities use funds to ensure that existing laws are being followed, and there may be changes yet to come regarding ‘donor controlled’ charities, including rules about minimum distributions which must be made each year.

Charities seem to agree that better enforcement of existing laws is preferable to more law changes. The not-for-profit sector has already responded to considerable change in recent years; charitable trusts were impacted by the Trusts Act 2019, and incorporated societies have been significantly affected by substantial law changes under the Incorporated Societies Act 2022.

The most common criticism of New Zealand law relating to charities seems to be that ‘advancement of religion’ qualifies as a charitable purpose, even where the religion (or a popular figure associated with it) has a questionable reputation. There are, however, no current proposals to review that aspect of the law.

DISCLAIMER: All the information published in Trust eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Trust eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2026. Editor: Adrienne Olsen. E-mail: [email protected] Ph: 029 286 3650

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