Investment Boost
Under New Zealand’s 2025 Budget, the Investment Boost tax incentive allows businesses to immediately deduct 20% of the cost of eligible new assets from their taxable income in the year of purchase, in addition to standard depreciation. Low cost assets (under $1,000 + GST) and assets with a lifespan of less than 12 months, continue to be 100% claimable.
✅ Eligible Assets
To qualify as a “new productive asset,” the asset must:
Be new and depreciable: Common examples include machinery, equipment, tools, work vehicles, and technology.
Include new commercial and industrial buildings: These are eligible even though they are typically non-depreciable.
Be imported: Both new and second-hand assets imported from overseas qualify, provided they haven’t been previously used in New Zealand.
Be available for use on or after 22 May 2025: Assets must be first used or available for use from this date.
❌ Ineligible Assets
The following assets do not qualify for the Investment Boost:
Assets previously used in New Zealand: Second-hand assets already in use domestically are excluded.
Land: Land itself is ineligible, though certain land improvements (e.g., fencing) may qualify.
Assets held as trading stock: Inventory items intended for sale are not eligible.
Residential buildings: Dwellings and most accommodation buildings are excluded, with exceptions for hotels, hospitals, and rest homes.
Fixed-life intangible assets: Assets like patents are not eligible.
Low-value assets: Assets fully expensed under other rules (e.g., those valued below $1,000) are excluded.
For detailed information, refer to the official Investment Boost Factsheet.
If you need assistance determining the eligibility of specific assets or have further questions, feel free to reach out.
Example:
Here's a working example to demonstrate how the 20% investment boost announced in the 2025 New Zealand Budget would work from a tax perspective.
Investment Boost – 20% Deduction on New Productive Asset
Scenario:
A company purchases a new piece of manufacturing equipment for $500,000 on 1 July 2025.
This asset qualifies as a "new productive asset" under the government’s incentive scheme.
The company has a 28% corporate tax rate.
Standard Depreciation (Without Incentive)
Let’s assume straight-line depreciation at 10% per year:
Depreciation for Year 1 = $500,000 × 10% = $50,000
Taxable deduction = $50,000
Tax saving = $50,000 × 28% = $14,000
With 2025 Budget Investment Boost
Immediate additional deduction = 20% of $500,000 = $100,000
Depreciation for Year 1 = $400,000 × 10% = $40,000 ($400,000 being $500,000 less $100,000 20% investment boost)
Total deduction in Year 1 = $100,000 + $40,000 = $140,000
Tax saving = $140,000 × 28% = $39,200
Net Benefit of Incentive:
Additional Year 1 deduction = $90,000
Additional tax saving = $25,200 more than without the incentive
This front-loaded deduction improves cash flow by significantly reducing taxable income in the first year, encouraging immediate investment in capital assets.
To Remember - Depreciation Recovered:
Depreciation recovery refers to the process of recognising income when a depreciated asset is sold or otherwise disposed of for more than its adjusted tax value (ATV) - or commonly known as book value. When an asset is sold for more than its ATV, the excess amount up to the total depreciation claimed is considered depreciation recovery income and is taxable. This mechanism essentially reverses the depreciation deductions that were previously claimed on the asset as the asset in fact, has not lost as much value as claimed.