Tax and Payroll Changes from 1 April 2025

As we begin the new financial year, several key tax and payroll changes have come into effect from 1st April 2025. These updates may impact payroll, rental property tax claims, and employer obligations, so it's important to ensure your systems and processes are up to date.

Summary of Changes

ACC earners’ levy increases from 1.60% to 1.67%, with a higher earnings threshold of $152,790
Minimum wage increases to $23.50 per hour
Full mortgage interest deductibility reinstated for residential rental properties
Updated personal income tax thresholds now apply across the full 2025 tax year
New ESCT and FBT thresholds and tax rates take effect from 1 April 2025

1. ACC Earners’ Levy Increase

From 1 April 2025, the ACC earners’ levy rate increases from 1.60% to 1.67%, and the maximum liable earnings threshold rises from $142,283 to $152,790.

This means employees and self-employed individuals will pay slightly more in ACC levies. Employers should check that payroll systems are updated to reflect the new rate and threshold. If you're self-employed, this could impact your tax and ACC invoicing.

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2. Minimum Wage Increase

The adult minimum wage increases to $23.50 per hour from 1 April 2025. The starting-out and training wage also rises to $18.80 per hour.

All businesses must ensure employees are being paid in line with the new minimums. Update employment agreements and payroll systems accordingly to stay compliant.

3. Mortgage Interest Deductibility Reinstated

From 1 April 2025, residential property owners can once again deduct 100% of mortgage interest as an expense. This is the final step in the phased reinstatement of interest deductibility.

This change could reduce your taxable income if you own residential rental properties.

If you have any questions, please reach out to us about interest expenses being claimed going forward.

4. Personal Income Tax Thresholds – New Rates Now Fully Apply

From 1 April 2025, the updated income tax thresholds are fully in effect for the new tax year (2025/26). These thresholds were originally changed partway through the previous tax year (from 31 July 2024), which required special composite rates. But from now on, those composite calculations are no longer needed.

New annual tax thresholds from 1 April 2025:

10.5% on income up to $15,600
17.5% from $15,601 to $53,500
30% from $53,501 to $78,100

This means tax on income earned from 1 April 2025 onward will be calculated using these full thresholds. Employers should ensure payroll systems are updated to reflect this change for PAYE. If you're self-employed, your tax return for the 2025/26 year will also reflect the updated brackets.

5. Changes to ESCT and FBT Thresholds and Rates

Employer Superannuation Contribution Tax (ESCT)

If you contribute to employees’ KiwiSaver accounts, you’ll need to apply new ESCT thresholds when calculating tax on those contributions.

New ESCT thresholds from 1 April 2025:

Income Range	ESCT Rate
$0 – $18,720	10.5%
$18,721 – $64,200	17.5%
$64,201 – $93,720	30%
$93,721 – $216,000	33%
$216,001 and above	39%

These rates are based on the employee’s total income for the previous 12 months and their KiwiSaver eligibility. Make sure your payroll software reflects these changes to avoid under- or over-deductions.

Fringe Benefit Tax (FBT)

If you provide non-cash benefits like vehicles, discounted goods, or loans to staff, FBT applies. New thresholds and rates came into effect from 1 April 2025.

New FBT thresholds and tax rates:

Income Range	FBT Rate
$0 – $13,962	11.73%
$13,963 – $45,230	21.21%
$45,231 – $62,450	42.86%
$62,451 – $130,723	49.25%
$130,724 and above	63.93%

These apply whether you use the quarterly alternate rate method or the annual short-form method. Choosing the correct calculation approach is key to staying compliant and avoiding penalties.