The Best Tax Insights of 2025: Structures, Deductions & Smart Planning brings together the most powerful tax strategies discussed on Cheques & Balances last year. In this episode, the team unpacks how tax structures, deductions and smarter planning can materially change outcomes for New Zealand business owners and property investors.
How provisional tax really works
One of the biggest issues facing small businesses in New Zealand is how provisional tax affects cashflow. Businesses are required to pay their tax in three instalments throughout the year before they even know what their final profit will be. At the end of the year, Inland Revenue works out whether too much or too little has been paid, charging interest and penalties if it was short, while offering very little if it was overpaid.
Tax pooling was created to reduce this problem by matching taxpayers who have paid too much with those who have paid too little, shrinking the spread between what Inland Revenue charges and what it pays back. Building on that system, Taxi allows businesses to use their tax already sitting with Inland Revenue as security for funding, effectively turning tax into an asset that can be used to support cashflow.
There is around $18.4 billion of provisional tax paid each year by about 290,000 small businesses. If each of those businesses could access $20,000 secured against their tax, it would inject roughly $10 billion into the economy – around 2.5% of GDP – helping businesses invest, hire staff and grow.
Why structure matters
How income and assets are structured plays a huge role in how much tax is paid and how flexible those assets are. In New Zealand, the main structures are individuals, partnerships, companies, look-through companies and trusts, all of which are taxed differently. Income earned personally or in a partnership is taxed at marginal tax rates, companies are taxed at 28%, and trusts are now taxed at 39%, matching the top personal tax rate.
While companies appear attractive because of their lower tax rate, the money inside a company does not belong to the shareholder unless it is paid out. Retained earnings remain company assets, which means they cannot be freely used for personal purposes without triggering tax. This is why holding assets like property inside a company purely for tax reasons can create issues later on.
Trusts are designed to benefit nominated people, known as beneficiaries. A trust has a settlor, trustees who control the assets, and beneficiaries who receive the benefit. They are commonly used for asset protection and estate planning, and they also allow income to be distributed to people on lower marginal tax rates, such as a spouse who earns less.
Chattel depreciation: one of the most overlooked deductions
Chattel depreciation remains one of the most powerful deductions available to property investors. While buildings themselves can no longer be depreciated, items inside them – such as carpets, curtains, blinds, light fittings and appliances – can still be written down over time. These are known as chattels, and their depreciation is one of the few remaining non-cash expenses available.
A chattels valuation identifies and values every depreciable item in a property and applies a diminishing-value method, meaning higher deductions are received earlier. For example, an $11,000 valuation depreciated at 20% produces around $2,200 of deductions in the first year. Over its life, a typical valuation can generate roughly $6,000 of tax savings, at a cost of about $550 plus GST.
Chattel depreciation works best for new builds or newly purchased properties before tenants move in. It is less effective after major renovations or for properties that have been held for a long time without a valuation.
Home office expenses
Home office expenses allow business owners and property investors to claim part of their household running costs against their income. The legal basis comes from a court case where a schoolteacher successfully claimed home costs for work done at his kitchen table, setting the precedent for business use of the home.
A common approach is to claim 10% of expenses such as power, internet, insurance, rates, rent or mortgage interest. These are costs that would be paid anyway, making them particularly effective deductions. Where someone uses more of their home for business – such as a garage used to manage multiple rental properties – a higher claim may be justified.
Only one home office deduction can be claimed per household, even if multiple people run businesses from the same property.
Debt restructuring
Debt restructuring is one of the most powerful strategies available to property investors. A common scenario is where someone buys a new home and keeps their old one as a rental. Often, all the borrowing ends up on the new owner-occupied home, making the interest non-deductible, while the rental property ends up with very little deductible debt.
By transferring the former home into a look-through company at market value and borrowing against it, the debt can be shifted back onto the rental property. The assets and total debt stay the same, but the tax outcome changes significantly. At interest rates around 4.5%, this can generate $25,000 to $30,000 a year in deductions without changing the investor’s financial position.
With full interest deductibility restored, these restructures are once again available – and banks are currently more open to offering cashbacks and incentives as part of these deals.
Key takeaways
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Provisional tax removes billions from SME cashflow each year, but tax pooling and Taxi allow that money to work harder.
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The way assets are structured affects both tax and how easily money can be accessed.
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Chattel depreciation is one of the few remaining non-cash deductions for property investors.
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Home office expenses allow everyday household costs to be claimed against income.
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Debt restructuring can convert non-deductible home loan interest into deductible investment debt without changing your assets or total borrowing.
Next steps:
Buying a home, investing, or want better control of your money? Register now to join Mike and James for a practical 2026 financial planning webinar.
If you’d like to watch more, check out these other episodes below.
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Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
