BusinessNZ has welcomed elements of Labour’s Small Business Action Plan – A Fair Go, saying several measures reflect long-standing BusinessNZ positions, and says today’s announcement should prompt a wider, cross-party conversation about New Zealand’s outdated and unindexed tax settings, includng the case for a lower company tax rate. BusinessNZ has also raised strong concerns about any move to narrow Investment Boost, warning it would come at the direct expense of the wider business investment that underpins New Zealand’s productivity.
“Small businesses are the backbone of the New Zealand economy, and any credible plan to ease their cash flow and compliance burden deserves a considered look,” BusinessNZ Chief Executive Katherine Rich said. “There is real substance here, and some of it lines up with positions we’ve held for some time. But the detail – and what’s missing – matters just as much as the headline.”
GST registration threshold: overdue
“Raising the GST registration threshold is something BusinessNZ has already called for in our election priorities,” Ms Rich said. “It has sat at $60,000 since 2009 – 17 years without adjustment – and is now well below Australia’s equivalent of $75,000. We support this move and encourage all parties to adopt this policy.
BusinessNZ has previously put this case directly to Government. In 2023, BusinessNZ wrote in support of a small-business-led petition calling for the GST registration threshold to be raised, on the same grounds it is making today – that inflation has quietly eroded the threshold’s original intent.
The bigger issue: New Zealand doesn’t index its tax thresholds
Ms Rich said the GST threshold should not be looked at in isolation – it is a symptom of a much wider problem that BusinessNZ has consistently raised: New Zealand has no mechanism for automatically keeping tax thresholds in line with inflation.
“Income tax thresholds have not kept pace with inflation and Inland Revenue’s own advice to the Finance Minister estimated this fiscal drag has cost middle-income earners an extra $2 billion a year collectively , lifting the average tax rate by 1.65 percentage points above where it would otherwise sit.
“BusinessNZ’s long-standing position is that all tax thresholds, including income tax brackets and the GST registration threshold, should be indexed to inflation as a matter of course. That would stop the country lurching from one overdue correction to the next, and remove the temptation for any government to quietly bank the proceeds of bracket creep.”
Investment Boost: BusinessNZ welcomes threshold lift, but strongly opposes narrowing it to SMEs
BusinessNZ said it supports lifting the instant asset write-off threshold for small businesses – “that helps reduce tax compliance costs for SMEs, and we’ve supported measures like it for years,” Ms Rich said. But she said BusinessNZ would be strongly opposed to funding that change by scrapping or narrowing Investment Boost for larger businesses.
“Investment Boost is one of the most important productivity policies New Zealand has introduced in years, and BusinessNZ would be very opposed to seeing it curtailed,” Ms Rich said. “It currently applies to businesses of every size, with no value limit, and Treasury and Inland Revenue estimate it will lift New Zealand’s GDP by 1 percent, wages by 1.5 percent and the capital stock by 1.6 percent over the next 20 years – with around half of those gains expected in the first five years. The latest Inland Revenue survey data shows it is already working: 40 percent of firms that invested in new assets say it increased their investment spending over the past year, and nearly half of firms planning to invest over the next five years say it is positively influencing those plans.
“Investment Boost is forecast to cost around $6.6 billion through to 2029. Redirecting that broad-based incentive into a narrower scheme for businesses under $10 million turnover – to help fund a small-business package costed at $1.56 billion – would in effect strip billions of dollars out of the future investment New Zealand’s larger employers, exporters and manufacturers would otherwise have made.
“Larger businesses account for the bulk of New Zealand’s capital investment, and it is precisely that investment – in plant, technology and equipment – that lifts the productivity and wages of the whole economy, including the small businesses that supply and work for those larger firms,” she said.
“Our message is straightforward: support small business investment, absolutely – but not by taking a proven, broad-based productivity policy away from everyone else. Any replacement for Investment Boost must remain available to businesses of all sizes,” Ms Rich said.
Company tax rates need to be part of the conversation
Ms Rich said today’s announcement, welcome as parts of it are, sidesteps the tax setting BusinessNZ believes matters most for long-run growth: the headline company tax rate.
“BusinessNZ has long held the position that New Zealand’s 28 percent company tax rate is now well out of step with our peers and is holding back investment. Australia, the UK and Canada all sit at or below 25 to 26 percent. A staged reduction in the corporate rate, paired with continued reform of the Overseas Investment Act, would do more for New Zealand’s ability to attract and retain capital than any single small-business measure. We’d encourage every party to put a credible pathway on lowering the company tax rate back on the table this election,” she said.
Prompt payment: BusinessNZ does not support a mandated model
“Cash flow is the single biggest killer of small businesses, and it’s an objective BusinessNZ shares,” Ms Rich said. “But BusinessNZ has not supported a mandatory payment period along the lines proposed today.”
A mandatory approach was legislated through the Business Payments Practices Act 2023, which caused considerable concern among BusinessNZ’s larger members. That Act was subsequently repealed, with Government instead asking BusinessNZ to help design a voluntary Business Payments Code – work BusinessNZ has already carried out in detail with its membership.
“A single, economy-wide payment rule of around two weeks doesn’t account for how different sectors actually operate,” she said. “Government payment mechanisms are relatively uniform across departments by comparison; the private sector spans a much wider range of payment cycles, contract structures and sector norms, and a one-size-fits-all rule risks significant upheaval and compliance cost in sectors it wasn’t designed for.”
BusinessNZ also pointed to tools already delivering faster payment voluntarily. “E-invoicing has been established by Government and running for several years, and many large businesses have already adopted it as a way to pay small suppliers faster,” Ms Rich said. “It takes time for businesses to change internal systems to accommodate a new requirement, and legislating a blunt, universal rule ahead of that transition is a heavy-handed way to get there.”
“There is also no agreed definition of a ‘big business’ in this context,” she said. “Any threshold needs to be very carefully designed so it doesn’t inadvertently capture medium-sized enterprises that face exactly the same cash-flow pressures this policy is meant to relieve.”
“BusinessNZ will continue to engage constructively with all parties on small business and tax policy in the lead-up to the election. We’d welcome commitments from Government and other parties to properly index tax thresholds, to protect and build on Investment Boost rather than narrow it, and to put a lower company tax rate back on the agenda – not just fixes that arrive once the political pressure becomes convenient,” Ms Rich said.