Business and Tax Updates July 2025: IBBZ Accounting

Summary:

As we begin the second quarter of the tax year, July marks an important time for reviewing mid-year progress and ensuring all financial obligations are on track. Whether you are preparing GST returns, updating payroll records, or reviewing provisional tax, now is the time to act.

Several important tax changes also came into effect this month. You will find key highlights throughout this newsletter to keep you informed.

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. New AI Guidance for NZ Businesses

MBIE has released Responsible AI Guidance to help Kiwi businesses adopt artificial intelligence safely and ethically. The guidance is voluntary and part of New Zealand’s first national AI strategy.

Why it matters

• Boost productivity: Businesses are encouraged to use AI for automating administrative tasks, improving customer service, and optimising inventory management.

• Competitive advantage: Responsible AI adoption can save time, reduce costs, and build trust with customers by aligning with ethical standards

Three Practical Step

1. Start small, then scale:Pilot AI on a focused business problem, such as answering customer queries or auto-managing stock, before expanding to larger use cases.

2. Build internal AI awareness:Train your team in basic AI understanding so they can identify opportunities and grasp how AI integrates into core operations.

3. Choose trusted tools and partners:Work only with AI products and providers that match your business values and comply with New Zealand’s legal and ethical requirements.

Peer Learning and Community Support

The Engage with industry peers to share experiences and best practices; collaborative learning can foster confidence and reduce risks as you adopt AI.

2. Official Cash Rate Held at 3.25%

The Reserve Bank of New Zealand held the Official Cash Rate (OCR) at 3.25% in its latest review on 9 July 2025, maintaining a pause after six consecutive cuts since August last year.

While inflation has eased and the economy shows modest growth, the RBNZ is taking a cautious approach. A further cut of 25 basis points is expected in the coming months, with the next review scheduled for 20 August 2025.

What this means for businesses and households:

Borrowing costs may remain stable in the short term, with potential for slight relief later this year, especially for variable-rate loans and short-term lending.

3. Hiring a Veteran: A Valuable Asset to Your Business

If you are looking to grow your team, military veterans can be a smart and strategic hire. Veterans bring a wealth of experience and transferable skills including leadership, discipline, adaptability, teamwork and problem solving, all of which are highly valued in the workplace.

Their ability to perform under pressure, follow through on commitments and lead with integrity makes them well suited for a wide range of roles. Many also have specialised technical training and a strong work ethic developed through years of service.

Hiring a veteran is not just good for business. It is a way to tap into a talent pool that is resilient, reliable and ready to contribute from day one.

Important Tax Updates

1. Missed your 7 July Tax Return Deadline?

If you did not file your income tax return by 7 July, Inland Revenue may apply late filing penalties and interest on any unpaid tax.

You should file as soon as possible to minimise further charges. If there was a valid reason for the delay, you can request a remission of penalties through myIR.

Clients linked to a registered tax agent usually receive an extended deadline until 31 March. If you are not yet linked to a tax agent, please contact us. We can assist with your return, apply for remission if eligible, and help you avoid missing future due dates.

2. KiwiSaver Contribution Changes – Effective 1 July 2025

Several changes to KiwiSaver have come into effect from 1 July 2025:

• Government contribution reduced
  The annual government contribution is now 25 cents per dollar contributed, down from 50 cents. The new maximum is $260.72 per year.
  
  
• High-income threshold introduced
  Individuals earning over $180,000 per year are no longer eligible for government contributions.
  
  
• Younger members included
  16- and 17-year-olds are now eligible to receive government contributions when they join and contribute.

These changes aim to better target government support and encourage long-term savings. If you have questions about how this may affect your contributions or payroll setup, please feel free to contact us.

3. Operational Statement OS 19/03 – Square Metre Rate for Dual Use of Premises

The annual square metre rate for the 2025 income year (1 April 2024 to 31 March 2025) has been updated to $55.60.

Legislative Reference – Section DB 18AA, Income Tax Act 2007

This section allows taxpayers to claim a deduction using a simplified square metre rate method when part of their private residence is used for business purposes. 

Deduction Formula 

(total premises costs × business proportion) + (business square metres × square metre rate)

Definitions

• Total premises costs: Actual mortgage interest, rates, and rent paid for the premises.

• Business proportion: Ratio of business-use area to total area.

• Business square metres: Area used primarily for business.

• Square metre rate: $55.60 (as published by the Commissioner).

Note: Taxpayers who apply this method cannot claim any other deductions for business use of the premises.

Background and Purpose 

Section DB 18AA was introduced to reduce compliance costs for small businesses by simplifying the calculation of home office deductions. It removes the need to:

• Keep detailed utility bills (e.g., electricity, gas, insurance, telephone, internet)

• Apportion these costs between private and business use.

While utilities are covered by the square metre rate, mortgage interest, rates, and rent must still be calculated proportionately based on actual use.

Taxpayers may opt out of this method if they wish to claim based on actual expenses not covered under this calculation.

4. NZCR Clinical Trial Volunteers – Reimbursement Treatment

This determination applies to payments made by New Zealand Clinical Research Group (NZCR) to volunteers participating in clinical trials.

• A maximum of $150.00 per trip is treated as exempt income, deemed to be reimbursement for actual expenditure incurred.

• If a volunteer receives additional reimbursement from other sources, the exempt amount is reduced accordingly.

• Any amount exceeding $150.00 is subject to withholding tax.

Effective for payments from 1 April 2025 onwards.