The Government’s 2025 Budget, dubbed The Growth Budget, presents several key opportunities and challenges for forestry contractors. While economic forecasts predict a slow recovery, businesses are being encouraged to invest in productivity-boosting assets through new incentives. Here’s what forestry contractors need to know.
Economic Outlook & Industry Challenges
New Zealand’s economy has faced sluggish growth in recent years, with GDP expected to contract by -0.8% in 2025 before rebounding to 2.9% in 2026. Inflation is projected to ease to 2% by 2029, while unemployment is expected to decline from 5.4% to 4.3%. Despite these positive indicators, government debt has doubled over the last five years, leaving the country vulnerable to economic shocks or major natural disasters—both of which could impact forestry operations.
Key Budget Announcements Affecting Forestry Contractors
Investment Boost Tax Incentive – A 20% immediate tax deduction on new assets, including machinery and tools, offers forestry contractors a major opportunity to upgrade their fleets. However, tough economic conditions may limit many businesses’ ability to capitalise on this incentive right away.
Changes to Thin Capitalisation Rules – A proposed $65 million shift in tax policy could make infrastructure investments more accessible, potentially benefiting forestry-related projects.
Regulatory Responsibility Bill – Introduced just before the Budget, this bill aims to create a more predictable regulatory environment, which is crucial for contractors who rely on stable long-term business conditions.
Infrastructure Investments – The Government is injecting funds into transport networks, including $464M for rail maintenance and $219M for local roads damaged by extreme weather events. Improved infrastructure could support more efficient forestry logistics.
KiwiSaver Adjustments – Employer contributions will gradually rise from 3% to 4% by 2028. While this ensures better savings for workers, it also increases payroll costs for businesses, requiring careful budgeting.
In a recent discussion with Sonya Elmiger from Blackburne Group, she confirmed the benefits to contractors of the Investment Boost initiative.
“The Investment Boost will provide additional tax benefit for those purchasing ‘new’ forestry equipment—defined as equipment being used in New Zealand for the first time.
Eligible purchases will receive an additional 20% tax deduction in the year of purchase (which would otherwise not be available). Given the high capital cost of forestry equipment, this upfront tax savings could be significant.
However, it’s important to note that this upfront deduction reduces the asset’s book value. As a result, when the equipment is eventually sold, there may be depreciation recovery, which is taxable. Contractors should factor this into their long-term financial planning.”
Looking Ahead
While this Budget focuses on growth, achieving the forecasted economic recovery remains uncertain. If growth rates underperform, tax revenue shortfalls could impact future government investment—potentially limiting funding for critical forestry-related initiatives. Furthermore, New Zealand’s rising debt levels remain a concern, particularly in the face of natural disasters or international economic slowdowns.
FICA will continue to monitor how these policies impact forestry contractors and advocate for clear, stable regulations that support industry sustainability.
