Budget 2025 KiwiSaver Changes: What First-Home Buyers in NZ Need to Do in 2026

Budget 2025 halved the government contribution to $260.72 and pushed default rates to 3.5% (2026) and 4% (2028). Here is exactly how that changes your house deposit, and what to do about it.

Budget 2025 made the biggest set of changes to KiwiSaver in years, and almost all of them land squarely on people saving for a first home. The government's top-up was cut in half, the default contribution rate is climbing, and the whole thing now phases in across 2025, 2026 and 2028. If you are building a deposit, the maths has changed under your feet.

This guide breaks down exactly what changed, shows you the dollar impact on a real deposit timeline, and gives you a clear action list for the rest of 2026.

TL;DR: From 1 July 2025 the government tops up your KiwiSaver by only 25 cents per $1 you contribute, to a maximum of $260.72 a year (down from $521.43)¹². Default contributions rise to 3.5% on 1 April 2026 and 4% on 1 April 2028⁵. Smaller free top-ups, but bigger forced saving, so most first-home buyers reach their deposit faster, not slower.

What exactly changed in Budget 2025 for KiwiSaver?

Three changes matter most if you are saving for a first home. A fourth opens the scheme to teenagers.

1. The government contribution was halved. From 1 July 2025 the annual member tax credit dropped from 50 cents to 25 cents for every $1 you put in, capped at $260.72 a year instead of the old $521.43¹. To get the full amount you still need to contribute at least $1,042.86 of your own money between 1 July and 30 June¹.

2. High earners lost it entirely. The government contribution is now only paid to members with taxable income of $180,000 or less¹.

3. Default contribution rates are rising. The minimum employee and employer rate goes from 3% to 3.5% on 1 April 2026, then to 4% on 1 April 2028, automatically, with no action needed⁵.

4. 16- and 17-year-olds are in. They became eligible for the government contribution from 1 July 2025 and will get compulsory employer contributions from 1 April 2026⁷.

These are, in short, the Budget 2025 KiwiSaver changes for first-home buyers in NZ: a smaller top-up, an income cap, a higher forced-saving rate, and a new on-ramp for teenagers. Here is the before-and-after at a glance.

KiwiSaver settings before and after Budget 2025

Source: Inland Revenue and Te Ara Ahunga Ora Retirement Commission Budget 2025 summaries¹⁵⁷.

How does the halved government contribution affect your deposit?

In plain terms, the free money got smaller. You used to get up to $521.43 a year on top of your own savings; now the ceiling is $260.72¹. Over a typical deposit-building window, that adds up.

Worked example: the lost top-up over five years

Scenario: Aroha contributes the full $1,042.86 a year to qualify for the maximum government contribution, and she is five years from buying.

So Aroha loses about $1,300 of free money over five years, before any growth on it. That is real, but put it in perspective: it is roughly 0.15% of an $850,000 first home. It stings, but it does not move the deposit goalposts much on its own. The contribution rate change does far more heavy lifting, in the opposite direction.

The one group genuinely shut out is high earners. If your taxable income is over $180,000 you now get nothing¹. For a couple where one partner is over that line, that is the full $260.72 a year gone for that person.

What does the 3.5% (2026) and 4% (2028) rate rise mean for buyers?

This is the change that actually accelerates your deposit. From 1 April 2026 the default rate rises to 3.5%, and on 1 April 2028 it hits 4%, with your employer matching at each step⁵. More goes in from you and more comes in from your employer, automatically.

Worked example: the rate rise on a $75,000 salary

Scenario: Sam earns $75,000 and is a first-home buyer using KiwiSaver for the deposit.

At 4%, Sam has $1,500 a year more flowing into the account than at 3%, half of it his employer's money. Net of the smaller government top-up, Sam is clearly ahead. The forced-saving effect dwarfs the lost $260 a year.

One detail worth knowing: employer contributions are taxed before they land via ESCT, which runs 10.5% / 17.5% / 30% / 33% / 39% depending on your total remuneration (your salary plus the gross employer contribution), not your salary alone¹¹. Sam's $75,000 salary plus employer contributions sits in the 30% band, so not every dollar your employer "contributes" reaches your balance, and your provider account shows the net figure. ESCT is unavoidable and applies to everyone the same way, so it is not a lever you can act on, just a number to be aware of when you read your statement.

If you want this run against your actual salary and timeline, our KiwiSaver health check does it in a couple of minutes, or we can do it together in a KiwiSaver review.

Should you opt down to 3%, or use the rise to save faster?

From 1 February 2026 you can apply to Inland Revenue for a temporary savings reduction to keep paying 3% after the April increase. It lasts from 92 days to one year (about 3 to 12 months), can be renewed, and your employer may match the reduced 3% or stay at 3.5%⁶.

For most first-home buyers, opting down is the wrong move. Here is the trade-off, on Sam's $75,000:

• Stay at 3.5%: an extra $375 of your own money goes in each year, plus $375 from your employer you would otherwise forfeit. That is $750 a year toward your deposit.
• Opt down to 3%: you keep $375 in your back pocket each year, but you lose the matched $375 from your employer if they drop to 3% too⁶.

Opting down only makes sense if your cash flow is genuinely under strain, for example you are mid-build, carrying high-interest debt, or your income just dropped. For everyone else, the rate rise is an efficient way to build a deposit because half of it comes from your employer. Run the numbers before you reduce.

New eligibility for 16-17 year olds: an early head start

If you have a teenager working part-time, this is a quiet win. From 1 July 2025, 16- and 17-year-olds can receive the government contribution if they contribute, and from 1 April 2026 they get compulsory employer contributions too⁷. They are not auto-enrolled, the auto-enrolment age stays at 18, and they must join with a parent's permission⁷.

Why it matters for a future first home: the KiwiSaver first-home withdrawal requires you to have been a member for at least 3 years⁸. A 16-year-old who joins now clears that hurdle before they turn 19. Starting the clock early is worth more than the contributions themselves.

How do you recalculate your deposit timeline after the changes?

Do not just assume the changes cancel out. Re-run your number with the new settings. Three things move:

1. Add the rate rise. From April 2026 your contribution and your employer's both step up to 3.5%, then 4% in 2028⁵. This is the big positive.

2. Trim the top-up. Replace $521.43 with $260.72 a year in your projection¹. Make sure you are still contributing the full $1,042.86 to capture all of it¹.

3. Check the withdrawal rules still fit. You need 3 years' membership and must leave $1,000 in the account⁸. Note the First Home Grant closed to new applications on 22 May 2024 and is gone, so do not budget for it⁹. The first-home withdrawal and the First Home Loan remain⁹.

While you are at it, confirm your PIR is correct. Get it wrong and you over- or under-pay tax inside your fund, which slows the deposit. The thresholds are 10.5% (income $15,600 or less and total $53,500 or less), 17.5% (income $53,500 or less and total $78,100 or less), otherwise 28%¹⁰. And check your fees: a first-home withdrawal sits best in a lower-volatility fund as you near settlement. Simplicity charges 0.24% p.a. across its diversified funds with no membership fee¹², versus an industry average around 0.84% for conservative funds on Sorted's Smart Investor¹³.

Fees on a $30,000 first-home balance

A growth fund can swing sharply in the final two years before settlement. Matching the fund to your buy date matters more than chasing the last basis point of fee.

Your post-Budget action checklist

01. Confirm you are getting the full government contribution. Contribute at least $1,042.86 of your own money each 1 July to 30 June, or you leave part of the $260.72 on the table¹.

02. Decide on the April 2026 rate rise. Default is 3.5%, automatically⁵. Only apply for the opt-down to 3% if cash flow truly demands it⁶.

03. Check your income against the $180k cap. Over it, and the top-up no longer applies to you¹. Plan around it.

04. Verify your PIR and fund choice. Wrong PIR or an over-aggressive fund near settlement quietly costs you deposit¹⁰.

05. Start the 3-year clock for any 16-17 year old in the house. Join now to clear the first-home withdrawal membership rule early⁷⁸.

06. Re-run your deposit timeline. Use the KiwiSaver health check, then book a free review to pressure-test it.

Frequently asked questions

Is the KiwiSaver government contribution really halved? Yes. From 1 July 2025 it pays 25 cents per $1 you contribute, up to a maximum of $260.72 a year, down from 50 cents and $521.43¹. You still need to contribute $1,042.86 of your own money to get the full amount¹.

Do I have to do anything when the rate rises to 3.5% in 2026? No. The increase from 3% to 3.5% on 1 April 2026 (and to 4% on 1 April 2028) applies automatically⁵. If you want to stay at 3%, you must apply to Inland Revenue for a temporary savings reduction from 1 February 2026⁶.

Can I still use KiwiSaver for my first-home deposit after Budget 2025? Yes. The first-home withdrawal is unchanged: 3 years' membership, leave at least $1,000 in the account, apply through your provider⁸. Note the First Home Grant closed to new applications on 22 May 2024⁹.

Does the $180,000 income cap affect my deposit? Only the government top-up, and only if your taxable income is over $180,000¹. Your own contributions, your employer's contributions and your ability to make a first-home withdrawal are all unaffected.

Should my teenager join KiwiSaver now? If they want to buy a home one day, starting the 3-year membership clock early is the real benefit, and from 1 July 2025 they also get the government contribution⁷⁸. They need a parent's permission to join before 18⁷.

Will the changes leave me worse off for buying a home? For most people, no. The lost top-up is roughly $260 a year, while the rate rise adds far more, half of it from your employer¹⁵. Run your own numbers with a KiwiSaver review to be sure.

General information, not personalised financial advice. Seek advice tailored to your situation before acting. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority and is a member of the Financial Dispute Resolution Service (FDRS). Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 16 June 2026.