Investment Boost - Deduction for New Investment Assets, Are You Eligible?

As part of Budget 2025, the Government has announced a new tax incentive - the “Investment Boost” - designed to encourage business investment through a one-off tax deduction for qualifying new investment assets.

Under the proposed amendments, businesses will be entitled to an additional deduction equal to 20% of the cost of eligible new investment assets.

The boost is available for expenditure incurred on or after 22 May 2025 and will apply in the income year the asset is first available for use (for depreciable property) or when expenditure is incurred (for non-depreciable assets).

Key Features of the Investment Boost

The boost is available regardless of the size or nature of your business. You can also claim for:

new commercial and industrial buildings
improvements to depreciable property (but not residential buildings)
primary sector land improvements
assets arising from petroleum development expenditure and mineral mining development

Not all expenditure will be eligible for the investment boost. You cannot claim for:

second-hand assets that are sourced from New Zealand
residential rental buildings
most fixed-life intangible assets (such as patents)

20% One-Off Deduction and Depreciation Impact

The one-off deduction for new asset expenditure is available at the time of acquisition. Future tax depreciation will then be calculated on the reduced cost base of the asset, i.e., 80% of its original cost.

Example 1: Depreciable Property Raj Ltd purchases a new asset for $10,000 on 1 October 2025. The asset has a 10% DV depreciation rate and is used for six months in the income year ended 31 March 2026.

Tax Deductions for 2025–26:

Investment Boost: 20% × $10,000 = $2,000
Depreciation: 10% × $8,000 × 6/12 = $400 Total deduction for the year = $2,400

Impact on business operations need to be considered as to whether the additional deduction impacts on accounting systems and processes. Tax fixed asset registers will need to account for the one-off deduction and adjustment to the cost base.

Eligibility Timing

The investment boost applies to most assets first used or available for use on or after 22 May 2025. The scheme does not have a set end date, so there’s no need to panic-buy before 31 March.

As the investment boost applies to new assets becoming available after 22 May, taxpayers needs to consider the process of acquisition or construction of assets to determine when they become available.

Example: Timing of Acquisition

Mr Simson, a builder, acquires the following assets in the year ending 31 March 2026:
A new van, available for use from 6 July 2025
A carport, construction started before 22 May and is available for use from 6 July 2025
A drop saw, purchased and used on 8 May 2025

As the drop saw was purchased prior to 22 May 2025 it does not qualify for the investment boost. It will however be depreciable property from 8 May 2025 assuming it is available for use in the business from this time. Consequently, it will only be eligible for a depreciation deduction.

Only the van and carport qualify for the Investment Boost.

Note the Investment Boost deduction must be the net of any capital contribution or government grants.

For large-scale projects, careful consideration of the test is warranted. If certainty is required, taxpayers can consider applying to Inland Revenue for a formal view or ruling.

Note that although this is a one-off deduction, on disposal of the asset there is potential for a recovery of the deduction taken. This is because the depreciation rules have been amended to ensure the Investment Boost deductions are included within the depreciation recovery calculations.

Additional Considerations

The Investment Boost deduction must be net of any capital contribution or government grants.

For large-scale projects, careful consideration of the test is warranted. If certainty is required, taxpayers can consider applying to Inland Revenue for an indicative view or ruling.

Note that although a one-off deduction is available, on disposal of the asset there is potential for a recovery of the deduction taken. This is because the depreciation rules have been amended to ensure the Investment Boost deductions are included within the depreciation recovery calculations performed on disposal.

What could this mean for you?

This is a great opportunity for businesses to invest in growth and upgrade assets, while getting a tax benefit which will help with cash flow. If you’re planning to make big purchases, talk to us to see how this boost could work for you.

Article contributed by: Prabhjit Singh, Business Advisory Manager at RSM NZ