NZ Budget 2026 Summary: IWTC +$50/wk Boost, KiwiSaver 3.5%, Donation Cap $100k

Hon Nicola Willis, Minister of Finance, delivered the Coalition government’s third Budget on Thursday 28 May 2026 at 2:00 pm NZST. From a personal-finance standpoint the Budget contains three substantive changes and a long list of things that stayed exactly the same. Two more land on the same day but were decided before the Budget: the temporary $50/week IWTC boost was announced 24 March 2026 and enacted 30 March 2026 — eight weeks before the Budget — and the Family Tax Credit and Best Start CPI uplift was set six months earlier by Order in Council. Both are often counted as Budget measures because their cost was charged against the Budget 2026 operating allowance, but neither was decided by this Budget — see sections 1 and 2. Everything below is sourced from the official Treasury Budget at-a-Glance, the IRD Tax Policy post-Budget summary, the 24 March Beehive release on the in-work tax credit, and the enacting Acts themselves — not from news coverage.

For the live calculator-by-calculator status dashboard, see the Budget 2026 hub. To estimate your specific annual dollar impact in under 30 seconds, use the Budget 2026 Net Impact Calculator.

Headline at a glance

Three substantive personal-finance changes:

1. KiwiSaver 3.5% step now confirmed effective 1 April 2026 — Stage 2 to 4% deferred to 1 April 2028. 16- and 17-year-olds become eligible for compulsory employer contributions.
2. New caps on donation tax credit ($100k/year) and a lift in the NFP tax-free income threshold ($1k → $10k).
3. Working for Families simplification package — fewer family scheme income adjustments, a higher other-payments de minimis, and a presence test in place of the residence test. Eligibility and income definition only; it moves no payment rate, and it first applies to the 2027-28 tax year.

Landing the same day but not a Budget 2026 measure: the temporary $50/week IWTC boost — announced 24 March 2026 by the Minister of Finance and enacted 30 March 2026, eight weeks before the Budget (see section 1) — and the Working for Families CPI uplift — FTC and Best Start weekly amounts step up with inflation effective 1 April 2026, set by the Income Tax (Tax Credit) Order 2025 (SL 2025/260) six months before the Budget (see section 2). Both are covered below because they change your payments on the same day, not because this Budget decided them; the only sense in which either is a “Budget” item is that its cost was charged against the Budget 2026 operating allowance.

What did not change: PAYE thresholds (still frozen), IETC ($10/week explicitly retained — a lift was rejected), KiwiSaver government member contribution (stays at $260.72), student loan repayment threshold ($24,128), ACC earner levy (1.75% / $156,641 cap), 2-year BrightLine, FIF $50k de-minimis, and GST 15%.

1. In-Work Tax Credit: $97.50 → $147.50 per week (TEMPORARY, NOT a Budget 2026 measure)

The biggest single change for working families. The IWTC base rate increases by $50/week to $147.50/week, lifting the annual entitlement from $5,070 to $7,670 for families with 1-3 dependent children.

This was not decided at Budget 2026. Finance Minister Nicola Willis announced the boost on 24 March 2026 in a standalone release responding to a global fuel-price shock, and it was legislated by an Amendment Paper to the taxation bill then before Parliament, enacted 30 March 2026 — eight weeks before Budget 2026 (28 May 2026). Its cost was charged against the Government’s Budget 2026 operating allowance, which is the only sense in which it is a Budget item.

Effective date: 1 April 2026. First payment for weekly recipients: Tuesday 7 April 2026. First fortnightly payment: 14 April 2026.

Critical caveat — it’s temporary: The boost runs for one year OR until the price of 91-octane petrol drops below $3/L for four consecutive weeks, whichever comes first. From 1 April 2027 the rate reverts to $97.50/week unless legislation is renewed.

Who benefits: IRD modelling forecasts ~143,000 families will receive the full $50/week and a further ~14,000 will become newly eligible at abated amounts as the higher base pushes eligibility further up the income scale. Income range affected: $0 to roughly $180,000 family income (depending on number of children).

Family-income examples showing the broad reach:

Eligibility: families with dependent children where at least one parent is in paid employment (employee or self-employed) and neither parent receives a main benefit from Work and Income. The $15/week-per-extra-child rate for families with four or more children is unchanged.

Use the Working for Families calculator with the 2026-27 toggle to see your boosted entitlement.

2. Family Tax Credit + Best Start CPI uplift

These are not a Budget 2026 measure. The dollar amounts were set by the Income Tax (Tax Credit) Order 2025 (SL 2025/260), an Order in Council made 17 November 2025 under s MF 7 of the Income Tax Act 2007 — six months before the Budget — and in force from 1 April 2026. Budget 2026 restated them; it did not decide them.

The WfF abatement threshold + rate were already locked by the Budget 2025 Regulatory Impact Statement (signed 4 April 2025); Budget 2026 simply confirms the 1 April 2026 effective date.

Best Start year-1 income-testing: From 1 April 2026 Best Start becomes income-tested at $79,000 / 21% abatement for the first year (it was previously universal for the first year). The second and third years were already income-tested at the same threshold.

3. KiwiSaver: 3.5% step confirmed, 16-17 year-olds now eligible

The KiwiSaver auto-step continues but on a more drawn-out timeline than earlier 2025 legislation suggested:

The earlier Budget 2025 legislation aimed at 4% from 1 April 2026 — Budget 2026 effectively deferred Stage 2 by two years, keeping the 2026-27 rate at 3.5%. Schools receive funding to cover the increased employer contributions.

The $260.72 government member contribution is unchanged — halved from the pre-Budget-2025 $521.43 level — and no restoration was announced.

See the KiwiSaver calculator for projections at the new rate.

4. Donation tax credit: new $100,000 annual cap

Previously the donation tax credit had no dollar cap — eligible donations were limited only by the donor’s taxable income, with the credit calculated at 33⅓% of eligible donations.

From 1 April 2027 (first applying to the 2027-28 tax year — not 2026-27) an annual $100,000 cap on eligible donations applies. The credit rate stays at 33⅓%, so the maximum annual credit any individual can claim becomes $33,333.33 (= $100,000 × 33⅓%). Donations made up to 31 March 2027 remain uncapped.

This is enacted law, not a proposal. Section 6 of the Taxation (Budget Measures) Act 2026 (2026 No 25), which received the Royal assent on 5 June 2026, inserts “the lesser of $100,000 and” into Income Tax Act 2007 s LD 1(3) and applies “to charitable or other public benefit gifts made on or after 1 April 2027”. The cap sits on top of the existing taxable-income limit rather than replacing it, so the ceiling from 2027-28 is the lesser of $100,000 and your taxable income.

The cap binds only on very high-income donors making large charitable contributions. Most filers — whose annual donations are typically under $10,000 — see no change.

See the donation tax credit calculator for the per-bracket impact.

5. Not-for-profit income threshold: $1,000 → $10,000

The amount of net income a not-for-profit organisation can earn each year before it has to pay tax has been increased from $1,000 to $10,000. Membership subscriptions and levies received by NFPs remain non-taxable.

This change targets the administrative burden on small clubs, societies, and community groups — the threshold has been at $1,000 for years and was being eroded by inflation. Effective from the start of NFP tax years beginning on or after 1 April 2026.

6. Working for Families simplification package (from 1 April 2027)

The measure that got the least coverage on Budget night, because it moves no payment rate at all. It rewrites how Working for Families entitlement is worked out. This is enacted law: sections 7 to 23 of the Taxation (Budget Measures) Act 2026 (2026 No 25) amend the Income Tax Act 2007, come into force on 1 April 2027 under section 2(1), and the family-scheme-income sections each carry an application clause for the 2027-28 and later income years. Nothing in it touches 2026-27, so no figure on this page or in our calculators changes because of it.

Fewer adjustments to family scheme income. Family scheme income is the income measure Working for Families abates against, and it is wider than taxable income because a list of add-backs sits on top. The Act deletes the ones officials judged low-risk:

• s MB 5 (distributions from superannuation schemes) — repealed;
• s MB 6 (distributions from retirement savings schemes) — repealed;
• s MB 10 (certain pensions and annuities) — repealed;
• the main income equalisation account adjustments in ss MB 1(5B)–(5E), MB 4(7)–(8) and MB 7(7)–(8) — repealed;
• Schedule 38 (Acts exempting income from tax: income included in family scheme income) — repealed.

Section MB 1(2) is replaced so that the only exempt income still pulled back in is maintenance payments under s CW 32. A transitional rule, new s MZ 4, keeps a main income equalisation deposit made in 2026-27 or earlier out of family scheme income when it is refunded in 2027-28 or later.

Other-payments de minimis: $5,000 → $8,000. Section 16 replaces “$5,000” with “$8,000” in s MB 13(3), so the “other payments” a family receives — the catch-all add-back for regular support from someone other than a spouse — only count once they exceed $8,000 in the year.

Two adjustments become opt-in by Order in Council. The employment-benefit adjustment for non-controlling employees (s MB 7B) and the non-settlor trust adjustment (s MB 12B) now apply only for an income year the Governor-General specifies by Order in Council on the Minister of Revenue’s recommendation. The order has to be published by 1 December to apply to the year starting the following 1 April, so families get a full year’s notice either way.

Residence test replaced by a presence test. This is the half that changes who qualifies. The “New Zealand resident” definition in s MA 8 is repealed, and ss MC 5 (the family scheme entitlement test) and MD 7 (the in-work tax credit test) are replaced with a presence test. Both the principal caregiver and the child must now ordinarily reside in New Zealand and be physically present here — the caregiver on the days they are claiming for, the child for the entitlement period — and one of them must be lawfully present under the Immigration Act 2009 on something other than a temporary entry class visa. The caregiver must also have been present for a continuous 12-month period at some point, unless they were brought here as a recognised refugee.

The travel allowance sits in new ss MC 5B and MD 7B: an absence of 42 days or less (six weeks) counts as presence in full. Go past 42 days and only the first 42 days count, and a second trip started within 42 days of getting home does not get its own allowance. Delays caused by a natural disaster or a “crisis event” — defined in s MC 5B(7) as an unexpected global or regional event including war, terrorism, unrest, pandemic or industrial action — are bridged, provided you tell IRD and can evidence it.

New ss MC 5C and MD 7C carry the longer exemptions, which have no 42-day ceiling: a child away at primary or secondary school overseas or on a sporting or cultural tour; a person in New Zealand Government service in any capacity, and any child travelling with them, or a partner accompanying them; and absences caused by the death, serious illness or serious injury of the person, the child or a family member, by medical treatment not available in New Zealand, or by criminal proceedings overseas. Each of these has to be notified to the Commissioner with satisfactory evidence.

If you are already outside New Zealand on 1 April 2027, transitional s MZ 5 treats your period of absence as starting on that day rather than counting the time you had already been away.

Knock-on for student loans. Because Schedule 38 disappears, s 27 writes the same five statutes into Schedule 3, clause 5 of the Student Loan Scheme Act 2011 directly (the Arbitration (International Investment Disputes) Act 1979, the Consular Privileges and Immunities Act 1971, the Diplomatic Privileges and Immunities Act 1968, the International Finance Agreements Act 1961, and the Pitcairn Trials Act 2002), and new s 215A lets that list be amended by Order in Council. This affects adjusted net income for student loan repayment purposes, not the $24,128 threshold or the 12% rate.

What it means for you. Nothing in 2026-27. From the 2027-28 year: if your household income included superannuation or retirement-scheme distributions, certain pensions or annuities, or income-equalisation deposits, your family scheme income falls and your entitlement may rise. If you spend long stretches overseas without fitting one of the listed exemptions, entitlement now stops after six weeks away where a residence test might previously have held. Because none of this is a rate change, the Working for Families calculator outputs the same amounts before and after — it models payment rates and abatement, not the family scheme income definition or the presence test.

What stayed the same

PAYE thresholds frozen. The Budget 2024 cuts already legislated remain — $15,600 / $53,500 / $78,100 / $180,000 / 39% with no inflation indexation announced. Fiscal drag (bracket creep) continues to lift effective tax rates as nominal incomes rise.

IETC retained at $10/week. Treasury explicitly considered and rejected a $5/week IETC lift, citing $230M-$560M cost for $5-10/week respectively, plus a 3-month payroll-system lead time meaning 75% of recipients (who choose year-end receipt) wouldn’t see anything until June 2027.

Student loan repayment threshold $24,128 + 12% rate retained. No CPI indexation announced.

ACC earner levy retained at 1.75% on earnings up to $156,641 (max levy $2,741.22). ACC operates on a separate annual cycle from Budget; no Budget 2026 amendment.

BrightLine 2 years retained. No restoration to the longer 10-year period.

FIF $50,000 de-minimis retained. FDR / Comparative Value / Cost methodology unchanged.

GST 15% retained — untouched since 2010.

Cost-of-living adjustments effective 1 April 2026

Separate from Budget 2026 announcements but taking effect the same day:

• NZ Superannuation: married-couple rate increases more than $50/fortnight to $1,708.16 (M tax code).
• Main benefits: 436,400 working-age beneficiaries see CPI adjustments.
• Family Tax Credit (covered above) and Best Start CPI-indexed for 282,000 families.
• Student allowance: single student 24+ not living with a parent rises >$11/week to $380.43.
• Jobseeker Support couple with children: rises >$20/week to $669.40.
• Sole Parent Support: rises >$15/week to $521.52.

Around 1.5 million New Zealanders receive at least one of these automatic adjustments.

What this means for your tax planning

For most filers, the practical net effect of Budget 2026 is:

• Working families with kids: noticeable increase via the temporary $50/week IWTC plus standard WfF CPI uplift. Re-run the calculator.
• KiwiSaver members: if you were on the 3% default, your deduction — and your employer’s — stepped up to 3.5% automatically on 1 April 2026; check your payslip shows it. Staying at 3% requires an application to IRD for a temporary rate reduction (3–12 months, renewable). If you had elected 4% or more, your own rate is unchanged.
• High-income charitable donors: be aware of the new $100k cap if your annual giving exceeds it.
• Everyone else: PAYE, ACC, student loan, GST — no change. Fiscal drag continues to do the work that bracket cuts would have done.

Calculators updated to 2026-27 Budget values

• Take-home pay calculator — full PAYE/ACC/KiwiSaver/student loan
• PAYE calculator — bracket-by-bracket breakdown
• KiwiSaver calculator — employer + employee + government
• Working for Families calculator — FTC / IWTC ($147.50 boost) / Best Start / MFTC
• Donation tax credit calculator — $100k cap modelled
• Student loan calculator — repayment projection
• IR3 tax refund estimator — full-year reconciliation
• Tax rates 2026-27 table — quick reference

Switch the tax-year selector to 2026-27 on any calculator to see the new numbers.