What is the Investment Boost tax deduction?
Announced as a surprise on Budget Day 2025, the Investment Boost is designed to encourage businesses to invest in new productive assets. If you buy new capital equipment, plant, or other productive depreciable property, you can now claim an instant 20% tax deduction - plus your usual annual depreciation. The goal? To help businesses grow and boost the wider economy.
How can my business benefit before 31 March?
The policy applies to new depreciable property acquired and available for use after 22 May 2025. If you already had capital expenditure planned, you may get a windfall deduction you weren’t expecting. If not, there’s an incentive to invest in some new productive assets before the end of the financial year to reduce your tax bill.
How does the Investment Boost work?
It’s simple:
- Buy a qualifying asset (for example, a machine for $100).
- Instantly deduct 20% ($20) from your taxable income.
- This deduction is at your marginal tax rate (28% for companies).
- You still claim annual depreciation on the remaining value.
Note: This is a tax deduction, not a cash refund.
What qualifies — and what doesn’t?
- Included: Most new productive assets, including commercial buildings and capital improvements (like seismic strengthening or extensions).
- Excluded: Residential property and fixed-life intangible property.
If you’re making improvements or alterations to commercial buildings, these may also qualify. Even second-hand goods imported from overseas can be eligible if they’ve never been used in New Zealand before.
Practical tips
- Plan ahead: Consider whether investing in new equipment before year-end could benefit your business and reduce your tax.
- Keep records: The deduction is self-assessed, you’ll need evidence of when the asset became available for use.
- Expect scrutiny: There may be audits to ensure claims are legitimate, especially around the timing of when assets are put into use.
Why has this policy been introduced?
The Investment Boost aims to build productive capacity and encourage businesses to invest and grow. Whether you’re in farming, manufacturing, or services, this could be the nudge you need to upgrade your tools, vehicles, or technology.
Need help?
Thinking about investing in your business or unsure about what assets are eligible for the Investment Boost? Talk to your local BDO adviser to make sure you’re making the most of the new Investment Boost policy.
Watch more insights in our Eyes on Tax video series, covering topics including Fringe Benefit Tax, property repairs and maintenance, tax residency, expanding your business overseas, trustee tax and more.
