Budget ‘win for automotive’

What does Budget 2025 mean for the automotive sector? By James McDowall, head of advocacy at the Motor Trade Association and a former MP.

Budget 2025 has been described, probably rightly, as a win for business – especially small and medium enterprises.

There’s no shortage of those in the automotive sector – from dealerships to workshops and collision repairers. So, by extension, it’s a win for our industry.

The centrepiece is the new Investment Boost tax incentive, which allows businesses to immediately deduct 20 per cent of the value of new capital assets, on top of normal depreciation. 

The policy is expected to inject fresh spending and activity into the economy, which is good news for suppliers and service providers alike. 

Means testing

One of the most noticeable shifts in Budget 2025 is the government’s expanded use of means testing.

• From April 2026, the first year of the Best Start Payment will be fully income-tested, with payments cut off for families earning more than $97,000 per year. 

• Government annual contributions to KiwiSaver will no longer be available to individuals earning more than $180,000 per year, and the sum is being halved for everyone. 

• In 2027, the Jobseeker Benefit for 18-19-year-olds will be income-tested against parents’ earnings.

The latter is curious. On the surface, it makes complete sense: encouraging young people into work or study is positive, and it could increase interest in trades like automotive. After all, work or study… why not both? 

Many of them will end up in vocational pathways, especially on-the-job training like apprenticeships. 

That means now is the time to ensure the system is ready – with the right funding, support for employers, and a clear pipeline from school to skilled work. Automotive businesses could be a big part of the solution – if the investment follows. 

But the long lead time and lack of detail raises questions about how it will be implemented and whether the vocational system will be ready to absorb the extra demand. 

Annoyingly, the Budget does not include any new funding or expansion for the Apprenticeship Boost scheme; the previously announced narrowing of the scheme remains in place. 

While the Budget does invest in broader vocational education and training, including increased subsidies and support for enrolments, there is no direct reinvestment of Jobseeker savings into employer-facing apprenticeship support at this stage. That is a shame, a missed opportunity.

Luckily, there’s still plenty of time to have conversations about this.  

KiwiSaver changes

From April 1, 2026, the default KiwiSaver contribution rate will rise to 3.5 per cent. Then, from April 1, 2028, it will increase again to four per cent. 

For the few businesses using total remuneration packages, where KiwiSaver is included in the salary, this may not result in higher costs. But for most others, it will be an added expense. 

For example, if you have an employee earning $80,000 per year, your current employer contribution at three per cent is $2,400 annually. 

Under the new four per cent rate, that increases to $3,200 – an extra $800 per employee each year. 

Start-ups are also set to benefit from changes to employee share scheme taxation, making it easier for them to attract and retain talent in a competitive global market. 

This means employees who receive shares as part of their remuneration will be able to defer paying tax on those shares until a later point – typically when the shares become more liquid or are sold.

Defence boost

As a former political spokesperson for defence, I thought I’d slip this one in.

The Budget delivers a significant uplift in defence funding, with $477 million in new operating spending and over $1 billion in new capital investment allocated to the New Zealand Defence Force. 

The funding will support upgrades to equipment, infrastructure, and personnel readiness. An additional $1.6b is earmarked for defence in Budget 2026. 

Why is this relevant? As the Defence Force ramps up recruitment and training, it should attract young people with mechanical, engineering, or technical interests – the same talent pool automotive businesses rely on for apprenticeships and skilled roles. 

Employers may need to compete more actively for talent or consider how to position automotive careers as equally rewarding and future-focused. There you go, I made it relevant. 

Conclusion

Budget 2025 – in theory – sets the stage for a more resilient economy that relies less on government debt. 

Now is the time for employers to get ready – whether it’s planning for KiwiSaver changes, thinking about how to attract and retain skilled staff, or making the most of new investment incentives. 

In the lead-up, the Government signalled that it was not going to be about short-term wins but about laying the groundwork for growth – and businesses that are ready to adapt will be well placed to lead the way. That is what New Zealand got on Budget Day.