The Government’s 2025 Budget has introduced a significant new tax incentive called the Investment Boost, designed to encourage businesses to invest in new productive assets. This initiative allows for an immediate 20% tax deduction on eligible capital investments, helping to reduce your tax bill while supporting long-term growth.
What is the Investment Boost?
From 22 May 2025, businesses can claim an upfront 20% deduction on the cost of new qualifying assets in the year they are first used or available for use. The remaining 80% of the asset value is depreciated over time using standard depreciation rules. This deduction is available to all types of businesses including companies, sole traders, partnerships, and trusts.
What Assets Are Eligible?
The deduction applies to new capital assets such as:
- Commercial and industrial buildings (excluding the land component)
- Machinery and plant (e.g. cranes, specialised tools, factory equipment)
- Farm infrastructure (e.g. irrigation systems, new pumps, fencing, storage sheds)
- Office equipment and technology (e.g. servers, commercial-grade IT systems)
It is worth noting that the Investment Boost is depreciation, and as such, if the asset were sold for more than its book value, it would create a depreciation recovery
Who Can Benefit?
All business entities operating in New Zealand are eligible, including trusts and sole traders, provided they acquire eligible depreciable assets. This is particularly relevant for those planning upgrades, expansions, or improvements over the next 12–24 months.
Example 1: Transport Company Purchasing a Truck
ABC Transport Ltd purchases a new truck on 1 July 2025 for $400,000 (excluding GST). The truck is delivered and available for use immediately.
- Immediate 20% deduction: $80,000 claimed in the 2026 tax return
- Remaining $320,000 depreciated under standard rules (e.g. 30% = $96,000 in year one)
- If this deduction creates a tax loss, that loss may be carried forward under normal rules
Example 2: Manufacturing Business – High Value Machinery
Precision Engineering Ltd invests in a state-of-the-art CNC machining centre for $1,200,000 (excluding GST), which is delivered and commissioned on 5 August 2025.
- Immediate 20% deduction: $240,000 claimed in the 2026 tax return
- Remaining $960,000 depreciated under standard rules (e.g. 13% = $124,800 in year one)
- The investment significantly enhances productivity and reduces taxable income in the first year
What You Need to Know
- Only new assets (or new to NZ) are eligible
- The asset must be used for income-generating activity
- The 20% is a deduction, not a tax credit – if it results in a loss, it may be carried forward
Take Advantage Now
If you are planning capital investment in the next financial year, now is the time to act. This incentive provides an excellent opportunity to bring forward productivity-enhancing investments while reducing taxable income.
If you would like to discuss your eligibility or review planned purchases to maximise your benefit, please
contact us today.