On 22 May 2025, as part of the 2025 Budget, the Government introduced a new tax incentive called the ‘Investment Boost’, aimed at encouraging capital investment. It allows an immediate upfront deduction for 20% of the cost of an eligible asset. The new legislation applies from 22 May 2025.
The Investment Boost applies to a broad range of assets, such as tools, machinery, vehicles, improvements to farmland, aquaculture business, forestry land and the planting of listed horticultural plants.
In relation to depreciable assets, it needs to be new or used in New Zealand for the first time.
The 20% deduction is on top of standard depreciation, which is then calculated on the reduced base (i.e. 80% of the asset’s cost).
A surprising aspect of the regime is that it applies to new commercial buildings. This is significant given commercial buildings are ordinarily subject to a 0% depreciation rate.
Where an asset is only used partially for business use, the deduction will need to be apportioned. When an asset is sold, if the sales price is above the assets adjusted tax value, this will trigger depreciation recovery income.
Assets which are not technically “depreciable property” but are currently allowed depreciation-like deductions, such as improvements to farmland, are eligible. However, eligibility is not based on use or availability for use. Instead, the 20% deduction is based on the amount incurred on or after 22 May 2025.
Although, the benefit of the Investment Boost is arguably timing in nature, businesses have reacted favourable and it may ultimately drive the increase in capital investment the Government is looking for.
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