BDO Eyes on Tax: Key changes to KiwiSaver and how it might impact your business

Budget 2025 announced a series of phased changes to KiwiSaver, rolling out between July 2025 and April 2028. Some of these changes are already being felt by individuals and employers, while others will have a more material impact over the next two years.

Here’s what you need to know — and how to prepare.

What’s already changed?

From July 2025, the Government reduced its annual KiwiSaver contribution by 50%, lowering the maximum payment from $521.43 to $260.72. For the millions of New Zealanders with a KiwiSaver account, this change was immediately noticeable.

At the same time, KiwiSaver was opened up to 16- and 17- year olds, allowing them to:

  • make voluntary contributions
  • receive employer contributions (where applicable)
  • qualify for the annual Government contribution, and
  • receive contributions from family and friends to help build long term savings.

What does this mean for employers?

Although 16- and 17-year-olds have been able to enrol in KiwiSaver since July 2025, they only become eligible for compulsory employer and Government contributions from March 2026.

This creates a short transition period for payroll teams. In practice:

  • employers will need to make one month of contributions at the existing 3% rate for eligible employees in March 2026, before moving to the new default rate from 1 April 2026
  • even if a pay period spans both March and April, the contribution for the entire pay period must be deducted at the new rate.

Getting payroll systems and processes ready ahead of time will help avoid errors.

Default KiwiSaver contribution rates are increasing

From 1 April 2026, default KiwiSaver contribution rates for both employees and employers will increase from 3% to 3.5%. This is the first step in a phased increase to an eventual default rate of 4% from 1 April 2028.

For many businesses, this will result in higher employment costs. Employers should factor these increases into budgeting and remuneration planning now. 

Managing temporary rate reductions

Employees can apply to Inland Revenue for a temporary KiwiSaver rate reduction, allowing them to continue contributing at 3% for a period of three months to one year. Where a reduction is approved, employers can also continue matching the reduced rate.

Employers will be notified of any approved rate reductions either:

  • directly by the employee, or
  • by Inland Revenue, advising which employee has been granted a reduction and the period it applies to.

Once the approved period ends, contributions automatically revert to the higher default rate, unless the employee applies for a further reduction or actively chooses a different contribution rate.

From an employer perspective, the challenge is that rate reductions can be applied for, changed, or revoked at any time, increasing the administrative burden on payroll teams and the risk of non compliance if changes are missed.

“The phased nature of the KiwiSaver changes gives employers time to prepare, but it also adds complexity. Understanding when different rates apply, how temporary reductions work, and how these changes affect employment costs will be key to staying compliant and avoiding unnecessary administrative pressure.” 
Poppy Crawford, BDO Tax Partner


For more information about the changes, visit the IRD website. 

How BDO can help

KiwiSaver changes can create both cost and compliance challenges for employers. BDO’s nationwide tax and payroll specialists can help you understand how these changes affect your business, assess the impact on employment costs, and ensure your payroll processes remain accurate and compliant as contribution rates evolve. We’ll take the time to understand your circumstances and provide practical, jargon free advice, so you can stay focused on running your business with confidence.

For more help or advice, contact your local tax adviser.