Business and Tax Updates August 2025: IBBZ Accounting

Summary:

As we move further into the second quarter of the tax year, August is an ideal time to consolidate your mid-year progress and ensure that all compliance obligations remain on track. Whether it’s filing GST returns, reconciling payroll, reviewing provisional tax, or checking year-to-date financial performance, taking action now will help avoid unnecessary stress later in the year.

Several important tax changes also came into effect this month. We have highlighted the key changes and reminders throughout this newsletter to keep you well-informed and prepared

At IBBZ Accounting, we remain committed to helping you plan, meet your obligations, and navigate changes with clarity. As always, our team is here to support you throughout the financial year.

Thank you for your continued trust in our services.

Key Business Updates

1. OCR Cut 2025 and Its impact on the Economy

On Wednesday, 20 August, the Reserve Bank reduced the Official Cash Rate (OCR) by 25 basis points to 3.0%. Following the announcement, banks have begun lowering home loan rates, providing some relief for households through reduced mortgage repayments, although deposit holders and savers will face lower returns. The Reserve Bank also revised its forecast track, projecting the OCR to remain around 2.6% throughout next year.

This means households will experience some relief, as interest payments will be lower compared to last year. However, the current level of cuts is not significant enough to generate strong business confidence or trigger major new investment activity. While borrowing costs have eased slightly, businesses remain cautious about expanding in the present economic environment.

Exporters may benefit from a softer New Zealand dollar, while importers are likely to face higher costs. Overall, the Reserve Bank’s decision reflects growing confidence that inflation is easing, with the cuts intended to ease financial pressures while supporting demand cautiously without reigniting inflation.

2. Government proposes Ban on Card Payment Surcharges

New Zealand's government has announced to abolish most in-store debit and credit card surcharges for contactless payments starting from May 2026. This means shoppers will no longer face extra charges depending on how they choose to pay, whether tapping, swiping, or using a digital wallet. Those confusing ‘surcharge’ stickers often seen on EFTPOS machines are set to become a thing of the past.

The change will be introduced through the Retail Payment System (Ban on Surcharge) Amendment Bill, which is expected to be tabled by the end of 2025. It is estimated that the reform will save consumers around NZ$150 million each year.

However, the ban will not apply to online payments, foreign-issued cards, prepaid gift or travel cards, or transactions using networks such as American Express or UnionPay.

3. $30 Billion Boost in Infrastructure Projects

The Government has announced that the total value of infrastructure projects has jumped by $30 billion in just the last quarter, bringing the pipeline of projects to $237 billion. More than 9,200 projects are planned or already underway, ranging from new roads and highway upgrades to prison redevelopments and local works. Around $17.5 billion is set to be spent in 2025, marking the next stage where businesses and communities will begin to see the benefits of this investment.

What This Means for Businesses:

• More Work & Jobs: Construction companies and tradies will see more opportunities, and this means more jobs and stability in the industry.

• Boost for Local Communities: Projects happening across New Zealand bring work, contracts, and spending to regional towns as well as cities.

• Flow-On Benefits: It’s not just builders. Suppliers of materials, transport companies, consultants, and even local cafes and motels near work sites benefit from increased activity.

• Confidence & Growth: A strong project pipeline gives businesses certainty to invest, hire, and plan for the future.

In simple terms: more projects mean more jobs, more spending, and more confidence for Kiwi businesses.

Important Tax Updates

1. Deductibility of Repairs on Newly Acquired Assets

Clients often ask if expenses on repairing newly purchased assets can be claimed as deductions.

The Inland Revenue Department (IRD) has clarified again:

• Initial repairs on a newly acquired capital asset are not deductible as an expense.

• The capital limitation (s DA 2(1) ITA 2007) applies because such costs are capital in nature.

• Where the asset is depreciable property, the cost may be recovered over time through depreciation deductions (straight line or diminishing value method).

•  It is important to keep invoices and clear records showing whether work was done at acquisition (capital) or during business use (deductible).

Examples from Inland Revenue guidance:

• Joyous Greeting Card Co: Cleaning/repainting and repairs needed to make premises fit for use were essential initial repairs are treated as capital, no deduction allowed.

• Fredcount Apparel Ltd: Later repairs to roof, floor and drain were not essential initial repairs and not capital in nature and deductible expenses allowed.

2. Provisional Tax Reminders

The first instalment of provisional tax for the 2026 year is due 28 August 2025.

• Ensure payments are made on time to avoid late payment penalties and use-of-money interest.

• Reminders have been issued, please contact us if you have any questions about your payment obligations.

3. IRD Enforcement Focus

The IRD is currently focusing heavily on collecting overdue GST and employer deductions.

• New campaigns include phone calls and SMS reminders

• The IRD has recruited additional staff dedicated to overdue debt collection.

• Expect increased contact from IRD if you have outstanding balances.

4. Voluntary Disclosures

The IRD has issued new guidelines on making a voluntary disclosures.

Disclosures should clearly include:

• What went wrong

• How it happened

• Who was responsible

• What changes have been made to prevent recurrence

Making a disclosure before an audit can significantly reduce penalties and demonstrate goodwill. Guidance is available on the IRD website.

5. High Court dismisses judicial review of decisions to decline proposals for relief under s 177 of the TAA

Decision date: 30 May 2025
Case: Anthony v CIR [2025] NZHC 1382

• The High Court confirmed IRD’s broad discretion to refuse tax relief under s 177 of the TAA. Mr Anthony’s request to cancel a court judgment was rejected as not legally available, and Summit Scaffold’s proposed instalment plan was declined due to poor compliance history and insolvency. The Court held IRD must balance maximising recovery with protecting the integrity of the tax system.