20% Investment Boost Tax Deduction: Game Changer for NZ Businesses
The 2025 Budget announcement introduced a significant opportunity for New Zealand businesses: a new 20% Investment Boost tax deduction aimed at stimulating economic activity and encouraging business investment in productive assets. Effective from 22 May 2025, this incentive allows businesses to claim an immediate 20% deduction on qualifying business assets, on top of existing depreciation allowances. For business owners looking to invest in their operations, this could be a strategic turning point.
What is the Investment Boost?
The Investment Boost is a new, upfront 20% tax deduction available to businesses that acquire new qualifying depreciable assets for use in their business from 22 May 2025. This deduction is in addition to normal tax depreciation, although the asset’s cost base for depreciation will be reduced by the 20% already claimed. The goal is to reward businesses for investing in growth and productivity by easing the upfront tax burden of large capital purchases.
What Qualifies?
To be eligible, assets must meet several criteria:
Be depreciable property for tax purposes.
Be new to New Zealand, meaning they haven’t been previously used here.
Be used in carrying on a business activity in New Zealand.
Importantly, second-hand assets imported from overseas will also qualify, provided they are new to NZ and meet depreciation rules. This is especially good news for businesses that rely on imported equipment or vehicles.
Land, residential buildings, intangibles, and assets already fully deductible do not qualify. However, non-residential (commercial and industrial) buildings do qualify — even though they traditionally have a 0% depreciation rate. This could create significant tax planning advantages for developers and businesses investing in new premises.
Another positive is that construction started before 22 May 2025 can still qualify, provided the asset becomes available for use on or after that date. Additionally, capital improvements, including seismic strengthening, may also be eligible.
Clawback Provisions
Like depreciation, there is a clawback mechanism. If the asset is later sold for more than its tax book value or original cost, the 20% deduction may need to be repaid. This encourages genuine long-term investment, rather than short-term flipping of assets to benefit from deductions.
Strategic Considerations
This tax boost opens up planning opportunities for businesses that are considering large capital expenditures. Whether you're upgrading machinery, investing in new technology, or expanding premises, the upfront 20% deduction can help reduce the initial tax impact and free up cash flow.
However, it also requires careful tax planning. Structuring your purchases, understanding the timing of availability, and ensuring eligibility will be key. You’ll also need to consider the reduced depreciation base and how it affects your long-term tax profile.
Take Action
If you’re considering significant asset investments over the next year, now is the time to assess your plans. This incentive could reshape your return on investment — but only if you act strategically. Our team can help you evaluate asset purchases, assess tax outcomes, and align with your long-term business goals.
Contact us today to schedule a tax planning session and make the most of the Investment Boost.