Will Income Tax Thresholds Change After the 2026 NZ Election?

New Zealand's income tax thresholds have not been meaningfully adjusted for inflation in years. The top rate of 39% kicks in at $180,000 — a threshold set in 2021. The 33% rate applies from $70,000. For many business owners, contractors, and salaried professionals, bracket creep has quietly pushed more of their income into higher tax bands without any formal rate increase.

The 2026 election is the first real opportunity for that to change — in either direction. Here is what each major party is proposing, and what it could mean for your tax bill.

As a reminder, the current personal income tax rates are:

The company tax rate is 28% and has not changed.

National's pre-election position is clear on what it will not do: no new taxes, no CGT, no wealth tax. But the party has not announced any income tax cuts or threshold adjustments for this term.

This is a notable omission. National campaigned on tax relief in 2023 and delivered modest threshold adjustments in its first budget. But with fiscal pressures mounting — debt servicing costs are higher than forecast, and several spending commitments have proven expensive — there is little room for further cuts in the near term.

What it means for you: If National is re-elected, the current thresholds stay. No cuts, but no increases either. Bracket creep continues quietly.

ACT is the only major party campaigning explicitly on income tax cuts. The party wants to lower the top personal income tax rate and reduce the number of tax brackets, with the goal of simplifying the system and increasing incentives to earn and invest.

ACT has not published a fully costed threshold schedule for this election, but the direction is clear: lower rates, particularly at the top end. In previous policy documents, ACT has proposed collapsing the 33% and 39% bands into a single rate closer to 30–33%.

For a business owner drawing a salary of $120,000, the difference between a 33% and a 30% top rate on income above $70,000 is approximately $1,500 per year. Not transformative, but meaningful.

What it means for you: ACT's influence in the next government is the main pathway to income tax cuts. If ACT holds significant leverage in coalition negotiations, some form of threshold adjustment or rate reduction is plausible — though the final shape would depend on what National agrees to.

Labour's fiscal strategy is focused on reducing debt and "getting the books back into shape." The party has not announced income tax cuts and has signalled that new spending commitments will be funded through reprioritisation rather than tax increases.

Labour has not proposed raising income tax rates for this election cycle. The 39% top rate — which Labour introduced in 2021 — stays, but no further increases are planned.

The indirect income tax risk under Labour is the trust tax rate and potential wealth tax (see our separate post on trusts and the election). For straightforward salary or wage income, Labour's position is broadly neutral.

What it means for you: No cuts, no increases on personal income tax. The status quo holds.

The Greens want to increase the top income tax rate to 45% on income above $180,000, and introduce a new 50% rate on income above $300,000. The party would use the revenue to fund their wealth tax and increased social spending.

For most business owners and professionals, the 45% rate on income above $180,000 would be the most direct impact. A doctor or contractor earning $250,000 would pay an additional $3,150 per year compared to the current 39% rate on that income band.

The Greens are unlikely to lead a government, but as a coalition partner they would push for their tax policy in negotiations. How much survives depends on Labour's appetite for the political fight.

What it means for you: A Labour-Greens government is the scenario where income tax rates at the top end increase. The 45% rate on income above $180,000 is a realistic outcome if the Greens have meaningful leverage.

No major party has proposed changing the 28% company tax rate. This is one of the more stable parts of the NZ tax system — it has not changed since 2011 — and there is no political appetite to move it in either direction.

For business owners who operate through a company and retain profits in the company, the 28% rate remains the relevant planning rate regardless of the election outcome.

One issue that rarely gets discussed in election campaigns is bracket creep — the way inflation gradually pushes more income into higher tax bands without any formal rate increase.

The $48,000 threshold (where the 17.5% rate ends and 30% begins) has not been adjusted since 2010. In real terms, it should be closer to $70,000 today to maintain the same real income threshold. The same applies to the $70,000 threshold for the 33% rate.

Only ACT has explicitly acknowledged this problem and proposed addressing it. National has made no commitment to inflation-adjust thresholds. Labour and the Greens have not raised it.

For workers and business owners whose incomes have grown with inflation, bracket creep is a real and ongoing tax increase — it just happens silently.

The honest answer is that income tax thresholds are unlikely to change dramatically in the short term regardless of who wins. The scenarios where rates change significantly — ACT-driven cuts, or Greens-driven increases — both require specific coalition outcomes that are not certain.

What is worth doing now:

Review your salary vs. dividend mix. If you operate through a company, the split between salary (taxed at personal rates) and dividends (taxed at company rate + imputation) is worth reviewing annually. The optimal split depends on your personal marginal rate and the company's tax position.

Check your provisional tax. If your income has grown, your provisional tax instalments may need to increase to avoid use-of-money interest. This is independent of the election.

Model the ACT scenario. If ACT gains significant influence and income tax cuts eventuate, understand what that would mean for your drawings strategy — lower personal rates can change the salary/dividend calculation.

If you want to talk through your specific situation, get in touch — we are happy to run the numbers.

Related reading: How Much Tax Do I Pay in NZ? 2025–2026 Income Tax Guide | NZ Tax Rates 2025–2026: What Small Business Owners Need to Know | NZ Election 2026: What Each Party's Tax Policy Means for Business Owners