Small business Budget wishlist: Tax cuts, R&D and getting Kiwis spending

Tuesday, 20 May 2025

Small businesses are calling for tax reform in the next Budget even though the Government has signalled “austerity”.

The usual small business wishlist from the Budget - less red tape, and tax cuts or reform - has been added to this year, with companies across three different surveys identifying a need for help with innovation and R&D support.

Companies acknowledged they needed to turn around significant underinvestment in digitisation and a need for a leg up into R&D and further innovation across the surveys run by Prospa, Baker Tilly Staples Rodway and Xero/NZIER.

Prospa NZ managing director Adrienne Begbie says small businesses are cautiously optimistic ahead of the Budget.

But there was also the perennial feeling that small business was not confident about getting the support it felt it needed in Thursday’s Budget, despite what a majority of small businesses believed was a more business-friendly Government in the National-led coalition.

Small business lender Prospa surveyed 516 SME (small-medium enterprise) decision-makers from within and outside its customers between March and April 15, 2025.

Reflecting a tough 12 months in business, cashflow was a major ongoing challenge for the sector, with 59% of small businesses having three months or less in cash reserves and 22% with less than that.

Getting people happy to spend was what business was pinning its hopes on, and things like the half-billion dollar boost for the film industry announced last week, which would help local businesses like transport companies and hospitality venues, and consumers rolling off fixed-term mortgages would lead to more disposable income and more confidence to spend, said Prospa New Zealand managing director Adrienne Begbie.

But there was also hope for Budget 2025. Some 39% wanted to see tax reform while 25% were pushing for less red tape on local regulatory compliance.

“SMEs are approaching this Budget with a mix of cautious optimism and uncertainty,” Begbie told The Post. “There is overwhelming support for some kind of tax reform, tax cut or incentive for things like R&D [research and development] and support with recruiting staff.”

Just 26% of respondents were happy with the Government’s actions so far, while 37% said the Government hadn’t done enough to support the sector. Almost half of all respondents lacked confidence they’d be getting any meaningful support from Budget 2025.

She said a National Government meant small business support was expected, even if it was “nothing substantial”.

Baker Tilly Staples Rodway Auckland managing director David Searle says Government spending cuts are not enough for SMEs.

Cutting spending not enough

Accounting firm Baker Tilly Staples Rodway’s poll of 207 Aotearoa small businesses found 57% felt the Government had been managing the economy well so far, up from 14% in the last poll in August 2023, just prior to the change of government.

In that poll, 65% of businesses believed a National-led government would improve the operating environment for businesses, with just 8.5% predicting a worse outcome.

This year, however, 32% said they had performed worse over the past 12 months while 43.5% hadn’t seen any difference.

National chair of Baker Tilly Staples Rodway David Searle said the good news for the Government was that actions so far had helped boost longer term optimism.

“However to maintain that, we’ll need to see something more positive and innovative rather than more of the same.”

The respondents had some ideas of their own about tax settings. Tax cuts to boost competition were supported by 76% of respondents, but nearly the same percentage were in favour of a tax on charities, excluding sports clubs and business associations. And while 66% opposed a wealth tax, support for a capital gains tax had grown to 45%, up from 42% before the election.

The key message from SMEs was that cutting spending wasn’t enough.

“They’re calling for bolder action on our tax settings to help spur new investment and start growing,” Searle said. “The softening in attitudes towards new taxation is a sign of how much people want to avoid falling behind on critical services and keep moving forward.”

Digitalisation

Xero NZ manager Bridget Snelling says the company will go to Government to recommend expanding its existing small business advisory group.

Xero also called on the Government for better innovation for the sector and in its policy settings, particularly when it came to digitalisation.

The small business accounting software firm commissioned the NZIER (New Zealand Institute of Economic Research) to look into digital productivity for small businesses.

It showed that policy and investment into SME digital support at home was lagging other countries.

Xero NZ manager Bridget Snelling said the biggest issue for small local businesses was a lack of training and awareness of technology on offer that could boost productivity and cut down the time it took to complete basic tasks.

The report said SME investment in digital tools could create returns ranging from $2.40 to $3.10 for every dollar spent, and could have a potential $8.6b boost to the economy this year, when adjusted for inflation.

Snelling said current digital adoption in the country was “fragmented” with businesses opting to use websites and emails but not as many adopting advanced tech like AI, e-commerce and advanced analytics software.

“We fall quite low in global digitisation rankings,” she told The Post.

Xero compared New Zealand to the likes of Finland, South Korea and Australia in small business support, and found various incentives offshore.

For example financial incentives in Australia included its Small Business Technology Investment Boost, which were up to 80% subsidies for approved tech solutions in Singapore and subsidies for digital tools in the Netherlands.

Prime Minister Christopher Luxon outlines the path to Budget 2025, promoting fiscal restraint and debt control, while reassuring Kiwis that economic recovery and interest rate relief are underway.

“We have not had the policy support other countries have had,” Snelling said.

“Looking at our international counterparts, we see how they’ve encouraged and supported their small businesses to innovate and digitalise.”

Prospa’s Begbie said more businesses had been going online since the pandemic, and felt most small businesses like cafes and hairdressers wouldn’t require digitalised support.

But Snelling said a small cafe could use inventory tracking software to monitor things like coffee cup levels, bean supply and set up automatic updates orders for stock that’s running low.

“They can use analytics on how quickly they go through inventory and that can make cashflow forecasting more accurate,” Snelling said.

Getting real

Xero had dialled back its expectations about special perks given the Government’s upcoming Budget was likely to be an “austerity Budget'.

Instead, Snelling said, Xero would make recommendations to the Government to expand its existing small business advisory group to include small business leaders and academics who could provide better Cabinet-level advice on behalf of the sector moving forward.

“We don’t want more discussion, we need more action, but it needs to be palatable in an austerity Budget.”