The Government is seeking to attract more foreign investment by removing tax roadblocks, Finance Minister Nicola Willis has announced.

Speaking at a pre-Budget announcement today alongside Prime Minister Christopher Luxon, Willis said $75 million has been set aside over four years to encourage foreign investment in infrastructure and make it easier for startups to attract and retain high-quality staff.

“Presently, New Zealand’s thin capitalisation rules limit the amount of tax-deductible debt that foreign investors can put into New Zealand investments,” said Willis.

“The purpose of these rules is to prevent income being shifted offshore and to protect New Zealand’s tax base.

“However, there is a risk that the rules may be deterring investment, particularly in capital-intensive infrastructure projects that are typically funded by large amounts of debt. We need to strike a balance.

“Therefore, the Budget sets aside $65 million for a change to the rules, pending the outcome of consultation on the details.”

A further $10 million will be put aside to defer tax liability of some employee share schemes to help startups and unlisted companies.

“Currently, problems arise if tax bills for share income arrive when employees are unable to realise the value of their shares. The changes we are making will allow tax to be deferred until a liquidity event, such as the sale of the shares, occurs.

“These changes come on top of work under way to modernise and reduce compliance costs associated with fringe benefit tax rules and further adjustments to the foreign investment fund residence and other rules to make New Zealand a more attractive destination for migrants and digital nomads.”

The Government is also creating the new Invest NZ agency to roll out the welcome mat to foreigners wanting to invest here. Earlier this month, Luxon confirmed the upcoming budget would allocate funding towards it.

“Promoting global trade and investment has also been a focus of my Government in 2025, even before the recent bout of uncertainty offshore,” Luxon said.

Previous pre-Budget announcements

Over the weekend, Luxon announced $164 million would be invested in expanding after-hours 24/7 clinics around the country.

Act Leader David Seymour’s Regulatory Standards Bill is likely to be discussed at the press conference.

The bill, once enacted, is meant to create a framework for “good” regulation, but the proposal has its critics, including, it would seem, NZ First.

Luxon admitted on the Mike Hosking Breakfast on Newstalk ZB that NZ First had “issues” with the bill, but he said these would be “flushed out” through the select committee process.

“If you take a step back this is about making sure we do decent good lawmaking... it’s pretty complex legislation... it will benefit frankly by going through the select committee process,” Luxon said.

Luxon responded to speculation there might be full expensing of capital expenditure in the Budget as a pro-growth measure.

“That idea is not an unattractive idea. If you look at the small to medium-enterprises in New Zealand the top 10% are seven times more productive than the bottom 10%.

“A lot of it is to do with their adoption of capital and plant and equipment, so I’ve got a lot of sympathy for that,” Luxon said.

The Government is also likely to take questions on pay equity.

The Government’s pay equity reforms have dramatically rolled back the previous regime, which will likely see fewer successful claims and smaller claims when they are successful.

Over the weekend, Luxon responded to allegations from Labour that women working in the funded sector were unlikely to get pay equity deals.

The funded sector refers to services funded by the Government but delivered by someone else, often a private provider or a charity.

Labour had agreed to underwrite these pay equity settlements when it was in Government, accepting the funded sector could not pay for them itself.

Labour pointed to comments made by Workplace Relations Minister Brooke van Velden in Parliament last week, in which she said last year’s pay equity reset undertaken by Finance Minister Nicola Willis “suggested that the funded sector would not be funded by the Government for pay equity”.

Labour’s workplace relations spokeswoman Jan Tinetti accused the Government of “stringing women along for months before the law change two weeks ago”, saying without Government support, “pay equity in these sectors is unlikely to happen”.

Luxon said that under the new regime, people would be entitled to take a claim against their employer whether they worked in the public or private sector.

“We expect there will be pay equity claims, that’s why we’ve set money aside for that,” Luxon said.

Luxon said the Government would look at funded sector claims on a “case-by-case” basis.

“Obviously, the Government and government agencies that are supporting the funded sector, they’ll look at funding that through budget bids in the future,” Luxon said.

“There are obviously some organisations that the Government funds a large proportion of the funding and there are others that we fund a relatively small contribution. Anyone in the funded sector, or anyone in any sector, public or private, can make a pay equity claim under the new laws.

“We expect, sadly, there to be settlements that are needed. The Government will look at the funded sector on a case-by-case basis,” he said.