What is the Investment Boost?

From 22 May 2025, businesses can claim an immediate 20% tax deduction on the cost of eligible productive assets, with the remaining 80% depreciated as usual. This provides an early tax benefit, accelerating the depreciation claimable in the year of purchase.

The Government is hoping to increase business productivity by encouraging investment in capital assets. 

What counts as a Productive Asset?

Machinery, tools, equipment, vehicles and technology count as productive assets. Even commercial buildings are included. The inclusion of commercial buildings is interesting, because they have not been allowed a depreciation deduction since 1 April 2024.

What is excluded from Investment Boost?

Land and residential property are excluded from Investment Boost, though you may be able claim some improvements like fences. Second-hand assets previously used in New Zealand are excluded from the Investment Boost, but you could choose to import second-hand plant and equipment from overseas.  

Investment Boost excludes trading stock, fixed-life intangible assets like patents, and assets fully expensed under other rules.

You can read more about Investment Boost on the Budget 2025 factsheet[i].

Why You Shouldn’t Just Go Out and Spend, to Save Tax

A tax saving is not going to recoup 100% of your spending on a productive asset. If your company spends $10,000 excluding GST on a new machine, the immediate tax saving is $560 ($10,000 x 20% x 28% tax rate). The rest of the tax saving follows depreciation, so you have a tax saving of $2,800 over the life of the machine.

If you later sell the machine for more than book value, you will need to declare depreciation recovered as income. Even if part of the depreciation recovery was part of the investment boost deduction.

What Questions Should I Ask before Buying a Productive Asset?

How Does this Purchase Align with Our Business Strategy?

If your business is expanding to new products or markets, you need the resources for the expansion. Remember to factor in the costs associated with expansion such as installation, hiring new staff, training, management, inventory growth.

Will this Purchase Positively Impact Efficiency or Output?

Consider your current production capacity. If you are currently at full capacity on a production bottleneck, then adding another resource may help to reduce that bottleneck.

On the flip side, you may need to invest because obsolescence will negatively impact productivity. At JDW, we are investing in new Windows 11 computers and laptops because the old Windows 10 computers are not being supported after October 2025.

Can We Make a Purchase with Current Cashflow or Finance Arrangements?

Review your cashflow and decide whether you can use cash or look at financing options. Cash is better suited for maintaining working capital. Financing options may involve your regular banking options or using asset finance lenders.

What is the interest cost of borrowing? What is the opportunity cost of buying a capital asset? Does it mean you must make cuts elsewhere to fund it? Compare your expected return on investment with the cost of capital.

Tax Saving is one consideration

The Investment Boost is a great incentive for business, but before you rush out to spend, remember to ask yourself: Will this asset improve efficiency or output? Can you afford it without straining cashflow? What are our financing options and how does it compare to our return on investment? Does the timing suit our overall strategy?

If you’re considering a big purchase, let’s talk it through. At JDW, we can help you weigh the pros and cons – tax-related and otherwise – so you invest wisely.

-       Serena Irving

Serena Irving is a director in JDW Chartered Accountants Limited, Ellerslie, Auckland. JDW is a professional team of qualified accountants, business consultants, tax advisors, trust and business valuation specialists.

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An article like this, which is general in nature, is no substitute for specific accounting and tax advice. If you want more information about the issues in this article, please contact your adviser or the author.

  [i] https://budget.govt.nz/budget/pdfs/releases/l25a-factsheet-investment-boost.pdf