What an unclear 2026 Election result means for tax policy

For the reasons outlined above we consider major revenue positive tax reform would not be on the short run agenda. Tight fiscal settings are therefore likely to continue to influence decision making across the next term of government. 

Personal rate changes or cuts in the company tax rate are expensive to finance and may therefore require counter-balancing revenue positive reforms elsewhere, or substantial cost cutting. As such we don’t see major movement to reduce current tax rate settings for both individuals and companies in the near term. However, this will depend on the final make-up of the Government given that parties across the political spectrum are calling for changes to rate structures (the Greens, Te Pāti Māori and Opportunity focussed on reshaping the personal income tax rates, and New Zealand First on a company rate cut for smaller businesses). 

Finally, in the absence of major reform to provide additional fiscal headroom we expect continued investment into increased compliance review and enforcement activity by Inland Revenue to sustain what has become an important source of additional revenue.

For taxpayers, this could mean sustained scrutiny and compliance activity over the coming years, particularly in areas where Inland Revenue has not been as active to date. 

The sustainability of New Zealand’s retirement saving settings has been a significant focus of this election. National and New Zealand First have both proposed making KiwiSaver compulsory for all workers, combined with increased contribution rates and a Baby Boost payable into KiwiSaver for newborns. Labour has proposed making KiwiSaver contributions compulsory for all employers whether or not the employee is enrolled, combined with increased contribution rates.

KiwiSaver is likely to remain an important area of reform regardless of which bloc forms the Government, with several parties proposing higher contribution rates and changes to compulsory savings requirements. Opportunity and ACT find some common ground with a call to rethink the taxation settings on the investment returns from retirement savings. This could be one to watch for future reform. 

While employers should anticipate the possibility of increased contribution obligations in the future, we would expect that any significant changes would be unlikely to take immediate effect. Payroll providers, employers and the financial services sector would need adequate lead time to update systems and processes, so an announcement or legislative commitment would likely precede implementation by some margin.

The current 2026-2027 Annual Rates Taxation Bill lapsed when Parliament dissolved (see detail in KPMG’s earlier Taxmail here). We expect the incoming government to prioritise reinstating the Bill and to progress it to enactment by 31 March 2027. 

This would include the Fringe Benefit Tax motor vehicle changes, expansions to the realisation-based taxation option for foreign investment funds and simplifications to the financial arrangements rules, amongst many other reforms. 

While significant changes to the Bill appear unlikely, given the parties’ earlier support for the Bill, it is not impossible. Opportunity’s perspective on the proposals is untested. The Greens could be expected to push for EV preferences through a greater differentiation between petrol/diesel and hybrid/electric vehicle inclusion rates for FBT purposes. Another interesting change that could attract some more debate from both the Greens and Te Pāti Māori who propose a wealth tax, is the proposed $100,000 foreign investment fund de minimis. While that change is, in our view, largely a sensible compliance simplification measure it would reduce the taxation on share investments.