One of the problems with big awesome announcements that will benefit business owners, is that the initial excitement about them wanes and we forget about it. The announcement last year about the Holidays Act changes (it’s not even drafted yet!) is an example, as is the Investment Boost tax incentive.
If you're looking to invest in new equipment, machinery, or commercial buildings, the government's Investment Boost tax incentive could put significant money back in your pocket. Introduced in Budget 2025, this initiative allows businesses to claim an ‘immediate’ 20% tax deduction on eligible new assets, with no cap on investment value.
But did you know that you don’t actually have to spend big to qualify for this tax incentive?
What is the investment boost?
The Investment Boost was the centerpiece of Budget 2025. When you purchase qualifying new assets for your business, you can claim an instant 20% tax deduction on top of your regular depreciation deductions.
For example, if you invest $100,000 in new machinery, you can immediately claim a $20,000 tax deduction through Investment Boost, plus your normal depreciation deductions.
What does ‘tax deduction’ mean?
Sorry, you’re not reducing your tax bill by 20% of the asset’s value. What this means is that when you are preparing your annual accounts later this year, you will:
calculate the normal depreciation of the asset and add that into the ‘depreciation expense’ line on your profit and loss statement, AND
calculate 20% of the purchase price and add that to an expense line on your profit and loss statement.
Hot tip: always keep a record of your depreciation calculations so that each year, you remember how you did it last year (I learned that one the hard way!).
So, if you spend $100,000 on 1 April 2026, and you’re depreciating at 10%, then the total depreciation cost at 31 March 2027 would be 10%+20% = $30,000. If your company tax rate is 28%, then reducing your profit by $30,000 also reduces your tax bill by $8,400.
Who can claim?
The Investment Boost is available to all businesses in New Zealand, regardless of size or industry. There's no cap on the investment value, meaning whether you're investing $1,001 or $10 million, you can claim the 20% deduction.
What assets qualify?
To be eligible for Investment Boost, assets must meet three key criteria:
New or new to New Zealand - This includes brand new items bought in NZ or overseas, or second-hand assets imported from overseas that haven't been used in New Zealand before
First available for use on or after 22 May 2025 - The asset must become available for business use from this date onwards (meaning it arrived in the country after 22 May if it’s imported).
Depreciable for tax purposes - The asset must qualify for depreciation under normal tax rules.
What does ‘qualify for depreciation under normal tax rules’ mean?
In simple terms, depreciable assets are
Capital assets that lose value over time due to wear and tear or obsolescence
Used to earn income for your business
Assets that cost over $1,000.
Yes, that’s right, so if you spend just $1,099 on a new laptop, then that purchase qualifies for the Investment Boost tax deduction.
Eligible assets include:
Commercial and industrial assets
New commercial and industrial buildings (even though they depreciate at 0%)
Machinery and manufacturing equipment
Tools and equipment
Vehicles
Technology, computers, and IT infrastructure
Office furniture and equipment
Primary sector investments
Farm fencing and farmland improvements
Planting of listed horticultural plants
Aquacultural business improvements
Forestry land improvements
Assets from petroleum development and mineral mining (excluding rights, permits, or privileges)
Property improvements
Capital improvements to existing commercial buildings
Extensions and alterations that increase capital value
Seismic strengthening of commercial properties
Mixed use assets
You can claim Investment Boost on the business-use portion of assets that have both business and private use. However, you cannot claim for the portion used for private purposes.
Imported second-hand assets
Second-hand assets imported from overseas are eligible, as long as they haven't been previously used in New Zealand. This opens up opportunities to purchase quality used equipment from international suppliers while still qualifying for the incentive.
What assets don't qualify?
Understanding what's excluded is just as important as knowing what qualifies:
Excluded assets
Second-hand assets sourced from within New Zealand (trading equipment between NZ businesses doesn't increase the country's capital stock)
Residential rental buildings and residential land
Most fixed-life intangible assets, such as patents
Rights, permits, or privileges
Low-value assets claimed as immediate deductions (currently under $1,000)
Any portion of an asset used for private, non-business purposes
The exclusion of second-hand New Zealand assets is deliberate - the government wants to encourage new capital investment rather than simply transferring existing assets between businesses.
How to claim the Investment Boost
The claiming process is straightforward and doesn't require prior notification to IRD:
Purchase your eligible new asset
Calculate 20% of the asset's cost
Include this Investment Boost amount as depreciation in your tax return
Report it in the tax depreciation box on your Financial Statements Summary (IR10)
Important: If you claim Investment Boost on an asset, you must depreciate that asset. You cannot elect to make it non-depreciable.
What evidence do you need?
You'll need to maintain documentation proving:
When you purchased or acquired the asset
When it first became available for use in New Zealand
Your expenditure on the asset
This evidence might include:
Invoices, receipts, and proof of payment
Proof of ownership
Contracts and compliance certificates
For imported goods: bills of lading, customs clearance, freight invoices
Email correspondence, texts, or letters from the time of purchase
Understanding "available for use"
An asset is considered available for use when it's physically and legally capable of being used, even if you don't start using it immediately. For construction projects or improvements, this typically means when the work is complete to an identifiable stage that increases the capital value of the asset.
Minor or incidental use doesn't disqualify an asset. For example, a single demonstration of equipment while it's held for sale isn't considered "use" that would prevent the asset from qualifying.
Making the most of this opportunity
The Investment Boost represents a significant opportunity for New Zealand businesses to accelerate their growth and modernization plans. With no cap on investment value and immediate tax relief available, now is an excellent time to consider:
Upgrading aging equipment or machinery
Investing in new technology to improve efficiency
Expanding your commercial premises
Purchasing vehicles for your fleet
Making improvements to existing commercial properties
For businesses that have been delaying capital investments, the Investment Boost effectively reduces your purchase cost by 20% through immediate tax savings, making those investments more affordable and attractive.
Next steps
If you're considering making a significant business investment, consult with your accountant or tax advisor to ensure you maximise your Investment Boost claim and understand how it fits into your broader financial strategy. They can help you navigate the specific requirements and ensure you maintain the proper documentation for your claims.
For more detailed information and examples, visit the IRD website at www.ird.govt.nz and search for "Investment Boost."
Need a loan for that investment?
We have relationships with many types of lenders, that can help buy your asset. Finding lenders to fund against second hand or imported equipment can be tricky. But they’re out there and we know where to find them!
Contact us to discuss your needs.
This article provides general information about the Investment Boost tax incentive. For advice specific to your business situation, please consult with a qualified tax professional or accountant.