Pita’s perspective…
Over many years of working with farming families, business owners and individuals, Pita Alexander has built up a lot of practical wisdom about money, family and life. In this article he shares a collection of thoughts and comments to help you cope with the next 20 years in New Zealand. Topics include tax, the true cost of running a car, house costs, inflation, KiwiSaver, retirement, helping your children, and the habits that make the difference over a lifetime. Some points are numbers-heavy and some are simple home truths, but all of them are worth thinking about.
Tax: Where the Top Rate Kicks In
The top individual New Zealand tax rate sets in at $180,000. At that level, your income tax looks like this:
Terminal tax: $49,277 (27.38%)
All yours: $130,723 (72.62%)
Total: $180,000 (100.00%)
Above $180,000, the tax rate is 39 cents in the dollar.
Don’t get excited about your taxes. Focus hard on what you do with the tax-paid surplus.
Currency Rates as at 11 October 2026
One US dollar = NZ$1.78
One Australian dollar = NZ$1.24
One UK pound = NZ$2.36
One euro = NZ$2.00
One Canadian dollar = NZ$1.25
One Swiss franc = NZ$2.14
One Singapore dollar = NZ$1.39
This suggests that all of these countries would be expensive for New Zealanders to travel through.
New Zealand Households and Houses
Households in New Zealand: approximately 2,072,000
Private houses in New Zealand: approximately 2,184,200
The True Cost of Running a Car
IRD Vehicle Rates for Business Use
These are the IRD’s acceptable car expense claims for business purposes:
Petrol: $1.20 per kilometre total rate; 37 cents for running costs only
Diesel: $1.30 per kilometre total rate; 38 cents for running costs only
Petrol hybrid: $0.90 per kilometre total rate; 24 cents for running costs only
Electric: $1.02 per kilometre total rate; 23 cents for running costs only
A few points to note:
These rates apply for the 12 months from 1 April 2026.
A logbook is required.
The total rate covers all costs, including ownership and running costs, for up to 14,000 kilometres per year.
Above 14,000 kilometres, the running-costs-only rate applies.
Worked Examples
If your petrol car did 12,000 kilometres a year for business purposes, your employer could reimburse you:
12,000 kilometres × $1.20 = $14,400 tax free
If your petrol car did 15,000 kilometres, the reimbursement would be:
14,000 kilometres at $1.20: $14,400
1,000 kilometres at 37 cents: $370
Total for 15,000 kilometres: $14,770
Two Cars Are Expensive
You can guarantee that if the IRD accepts these figures, they are on the conservative side.
Consequently, the true overall cost of owning and running two cars, which many families have to do, is surprisingly high. Say two cars each do 8,000 kilometres a year (22 kilometres per day). The true cost is at least:
16,000 kilometres at $1.20 per kilometre = $19,200 per year
I couldn’t get at the car value the IRD is using, but it is likely to be $5,000 to $10,000. A more valuable car would cost more than $1.20 per kilometre at the moment.
Reduce down to one car as soon as you can.
House Costs: Rates, Insurance and Repairs
A good benchmark at the moment for your annual house rates, insurance and repairs and maintenance (R&M) is 1.13% of the house’s present capital value. So, for an $800,000 house:
$800,000 × 1.13% = $9,040
If the government succeeds in capping rates increases at no more than 4%, the “Rule of 72” tells us your rates will double every 18 years. Personally, I feel 5% is more realistic, which would mean a doubling every 14.4 years.
I feel insurance and R&M costs will, like rates, also double over that time frame. So if you are 35 now, your rates, insurance and R&M will double (at 5%) about three times by the time you are 80.
A $2,000,000 house will have annual rates, insurance and R&M costs of around $22,600, and this may well double in 14.4 years to $45,200, based on my 5% suggestion.
Rental Property
Owning a house that is rented out with a mortgage of say 30% to 40%, even at $635 per week ($32,500 per year), is not wonderfully profitable for the owner unless there is an underlying inflation rate of no less than 3%.
Inflation and Investment Returns
A true 5% tax-paid return on any investment is a sound figure going forward, as long as the average inflation rate is 3% or below.
If you do the homework, you will find that a true investment return of 5% a year, tax paid, is actually a very sound return.
If your investments are earning 10% on a regular basis, there is probably quite a risk factor.
By 50 years of age, 75% of your investments, such as your house, must be inflation proof.
New Zealand’s Average Inflation Rate
1976 to 2026 (50 years): between 4.89% and 4.92%
2001 to 2026 (25 years): 2.63%
New Zealand will do well to hold the average inflation rate down to around 2.63% in future years. At 2.63%, the price level will double every 27 years (Rule of 72). At 3.63%, it would double every 19.8 years.
Thirty minutes on the Reserve Bank of New Zealand Inflation Calculator is 30 minutes very well spent.
Running a Business: Profitability and Pricing
At a continuous inflation rate of 4%, every businessperson in the country will be looking to increase their charges by at least 5%, simply to hold their profitability and purchasing power.
If a businessperson takes no action with a regular 4% inflation rate, then in two years’ time the increase in charge-out rates needs to be 10%, and that sort of increase often leads to push back.
Not many New Zealand businesses can cope with an annual interest rate of any scale above 6%.
In 90% of cases, businesses that get one month behind with their PAYE and/or GST payments never catch up.
When things go wrong in a family or business, the key source of the problem tends to be when these are constantly too high:
Interest
Rent
Personal drawings
Don’t defer a key capital expense any longer than necessary, providing you have done the homework.
Low profits are still better than losses.
Cut your losses yesterday.
Debt and Interest Rates
A 5-year fixed interest rate at say 3%, 4% or 5% is probably worth looking at. Certainty is always worth something.
If your interest rate is, say, 6% and is not income tax deductible, then debt reduction will probably beat anything else you may like to do.
There is a lot more talk about debt reduction than there is actual action.
Saving and Budgeting
How Much Do You Need to Save?
No less than 15% of your gross income. Repaying your mortgage counts as savings in this equation.
Renting vs Buying
Renting a house from 25 to 65 years of age can work for a couple, providing:
They have financial discipline
They save at least 15% of their joint income
Those savings are earning compound interest
Purchasing a house by 35 years of age, though, means the bank is forcing you to save hard.
Good Money Habits
Never gamble with more than 1% of your available funds.
If you can’t afford to buy it, then you can’t afford it.
A couple needs to prepare a joint annual budget: collective responsibility and accountability.
Treat cash with respect. It still has a major place, particularly in your bank.
Being naturally impulsive means you are naturally expensive.
In today’s world, being good with money is second only to breathing.
If you can get job satisfaction from saving and investing, you are more than halfway to a lifetime of happiness.
From 20 years of age, you must know your numbers from front to back.
A good lifetime habit is to commit to paper key names, key numbers, key dates, key prices and key people. Sooner or later, you will want them.
Salary, Work and Job Satisfaction
If, at 45, your salary of $75,000 increases by say 4% a year, your salary might be:
At retirement at 65: $164,000
At retirement at 70: $200,000
Increasingly, many people will work through to 70 if their body allows it.
Don’t stop work if you are still getting job satisfaction 90% of the time.
If you like something, you will tend to be good at it.
Universities are not everything. Getting job satisfaction and being good at what you do will carry the day.
If you are not getting job satisfaction, you will not reach your potential.
If you are in the wrong job, do something about it, or you will be a pain to live with.
KiwiSaver, Retirement and National Superannuation
KiwiSaver
KiwiSaver funds are now approximately $140 billion. I don’t see why they cannot increase by say $12 billion a year, which would mean that in 25 years’ time the total fund could be worth perhaps $1,200 billion. This fund is going to help New Zealanders in retirement as well as help them purchase their first house.
A Balanced Asset KiwiSaver fund returning say 5% to 5.6%, mostly tax paid, with a good provider, is a sound investment.
A couple reaching 65 should consider letting their KiwiSaver accounts run on. From 65, they can deposit and withdraw at will.
Planning for Retirement
Within 20 years, the annual taxable income a couple will need from 65 to 95 years of age will be close to $100,000 per year. At present, gross New Zealand National Superannuation is $51,000 for a couple.
At retirement, you must have a debt-free house and a minimum of $800,000 of interest-bearing investments. Don’t argue with this. One of you working through to 70 would also help.
Plan on National Superannuation having an entry age of 67, and an annual means test above say $100,000 to $120,000 per couple, within the next 15 years.
You should probably not need any life insurance after 60 to 65 years of age.
Budgeting for the last 25 years of your life is similar to the first 25 years. Both are important.
At 70 years of age, your balance sheet must be rock solid.
There is nothing wrong with living on your capital. It is your money.
From 65 on, you must enjoy life. This is imperative.
Health Insurance and Reverse Mortgages
Don’t cancel your personal healthcare policy until the annual cost becomes prohibitive. But expect the premium to increase by 10% to 15% a year.
When that point comes, contribute $250 per month each into your KiwiSaver accounts. If your health care requires some expense, a KiwiSaver withdrawal will help. If it’s not needed, it will earn 5% to 5.5% in KiwiSaver.
A reverse mortgage has a place, but borrow as little as needed and as late as possible. At the moment, the mortgage principal will double approximately every 9.1 years.
Helping Your Children: Family Wealth and Succession
A partial early inheritance to help your children buy their first home is becoming more and more important.
Be careful gifting major sums to your children. Interest-free loans have a place, as you may need some of it back, or interest on it. It is also better in the event of their relationship breaking down.
Your financial position is more important than your children’s. They have 50 more years to get this area sound.
Don’t spend your inheritance. Invest it.
Your children and grandchildren must learn from you both across the kitchen table. Make sure you make yourself available.
Your kitchen table is more than a table. It records every key event.
Some children are late developers. Run with them.
Your children will inherit some of your poor traits. Help them iron these out.
Keep your children and grandchildren off motorbikes on the open road. If necessary, rattle the piggy bank to help them buy a car.
Your Lifetime Partner
Your lifetime partner knows your weaknesses, so listen to them.
You and your lifetime partner must be on the same page 90% of the time.
If you are poor with money, your lifetime partner must be the exact reverse.
If your lifetime partner is unhappy, then your unhappiness is still coming.
One marriage is almost one too many.
Getting Good Advice and Making Sound Decisions
An accountant, solicitor, engineer, farm consultant, doctor, dentist or lifetime partner who disagrees with your plans is always worth listening to. Someone who stands up to you may improve your plan.
A good financial adviser over time is gold.
Sometimes enough is enough. Listen to your key people.
Independent parties will probably write your CV better than you will.
Logical decisions are, over time, almost invariably better than emotional ones. “Why” is usually much more important than “when” or “how”.
By 30, your natural instincts will be sound. Don’t override them without a lot of homework.
Always pick your own time and your own location for a difficult discussion.
Don’t get involved in litigation at anything less than an 80% chance of success.
Don’t sign anything you do not understand.
Communication, Integrity and Leadership
Email and cellphones are marvellous, but for something really important or really serious, face to face is the best approach.
Listening is probably a better skill than talking.
Handshakes are still talked about, but anything important for your future will be down in black and white, with coffee stains.
If you can’t say something reasonably nice, then being reasonably quiet has a place.
Your integrity is never for sale. Ever.
Don’t make promises you cannot keep.
Don’t be late. You said you would be there.
If it is your fault, you fix it. Don’t delegate your errors down the line.
Lead from the front, not from behind.
A Few Home Truths
Most New Zealand politicians are not worth $181,200 per year plus allowances. Your instincts will be every bit as good as, or better than, 90% of them.
50% of the votes is the absolute minimum.
If you can’t afford a holiday, YouTube is just about as good.
If you love V8 vehicles, then presumably you are soundly profitable.
100% is pure, but 90% is what makes the world go around.
Bridges are not just for roads and rivers. People need bridges.
Opportunities don’t always knock on your door. Often you need to swim out.
Don’t be a thinker drinker. Be a thinker, planner and actioner.
Life is a mixture of annoying variables, but happiness is the key. If you have it, don’t sell it. If you don’t have it, your potential is still in front of you.
Talk to Alexanders Rural
Good financial management, sensible business planning and thinking ahead about succession make a real difference over the next 20 years, whether you’re running a farm business, planning for retirement or helping the next generation get started. If you’d like to talk through any of the points in this article, get in touch with the team at Alexanders Rural. We’re always happy to help.
Any views or opinions expressed in this article are those of Pita Alexander only and do not reflect the views of any other person or organisation. The information provided is for informational purposes only and is not intended to be financial advice.
DISCLAIMER
Any views or opinions expressed in this article are those of Pita Alexander only and do not reflect the views of any other person or organisation.
The information provided in this article is for informational purposes only and is not intended to be financial advice.
Any errors or omissions are the author’s own.