The Investment Boost, introduced in Budget 2025, is a significant tax incentive aimed at encouraging businesses to invest in productive assets whilst improving near-term cash flow. From a practical perspective, it brings forward tax deductions and can materially influence the timing of capital expenditure decisions.
Understanding how this incentive works and the planning required to maximise its benefits can make a substantial difference to your tax position and business cash flow.
What is the Investment Boost and how does it work?
Under the Investment Boost rules, businesses can claim an upfront deduction of 20% of the cost of eligible new assets, in addition to claiming standard depreciation on the remaining balance.
The rules apply to new assets that first become available for use on or after 22 May 2025 and are available to businesses of all sizes.
Eligible assets include most new depreciable business property such as plant, machinery, equipment, new vehicles, and commercial buildings, as well as capital improvements to those assets.
Is the Investment Boost a permanent tax saving or just timing?
Whilst the Investment Boost is often a timing benefit (bringing deductions forward rather than increasing them overall), there are important exceptions where it can result in a permanent tax saving or a one-off opportunity to access a deduction.
For standard depreciable assets, the Investment Boost accelerates deductions that would eventually be claimed through depreciation, providing immediate cash flow benefits even though total deductions over the asset’s life remain the same.
What assets qualify for the Investment Boost?
Assets must be tangible, new to New Zealand on or after 22 May 2025 (unless the asset was trading stock of the vendor and not previously used in New Zealand), and depreciable for tax purposes.
Eligible assets include plant and machinery, equipment and tools, new commercial vehicles, new commercial buildings and fit-outs, and capital improvements to qualifying assets.
Some restrictions apply, so obtaining tax advice before committing to significant purchases ensures you understand whether specific assets qualify and how to structure the purchase for maximum benefit.
How does timing affect Investment Boost claims?
For businesses with a 31 March balance date, the Investment Boost creates a clear incentive to review asset purchase timing before year-end. Assets must be acquired and first used or available for use by 31 March 2026 to qualify in the 2026 income year.
Delivery, installation, and readiness for use are critical factors. An asset ordered in February but not delivered until April won’t qualify for the current year’s deduction, making early planning essential for larger purchases.
This timing consideration becomes particularly important for assets requiring installation, commissioning, or site preparation before they’re available for use.
What cash flow impact does the Investment Boost create?
A practical example shows the immediate benefit: A company purchasing new equipment for $100,000 on 1 February 2026 can claim an upfront Investment Boost deduction of $20,000, with the remaining $80,000 depreciated under normal rules.
Assuming a 10% depreciation rate, total deductions in the first year with the Investment Boost would be $21,295, compared to a deduction of just $1,616 without it.
At the 28% company tax rate, this delivers a cash flow benefit of $5,510 in the year of purchase. For businesses making significant asset investments, these cash flow improvements can be substantial.
How does the Investment Boost apply to earthquake strengthening?
The Investment Boost is particularly relevant for earthquake strengthening of commercial buildings. As these buildings generally have a 0% depreciation rate, the ability to deduct 20% of qualifying strengthening costs upfront creates a genuine tax benefit rather than just timing.
Given the scale and complexity of many strengthening projects, early advice is recommended to ensure costs are structured correctly and maximum benefit is obtained from available incentives.
This represents one of the few opportunities to obtain immediate tax deductions for capital expenditure on buildings that would otherwise provide no depreciation claims.
What should businesses consider before 31 March?
Several key questions help determine whether accelerating investment makes sense:
Are there planned asset purchases that could be brought forward before 31 March to access the Investment Boost in the current year? Will the asset be delivered, installed, and available for use by balance date, or should timing be adjusted to ensure qualification?
Does the asset qualify for the Investment Boost based on the technical requirements, or are there restrictions that might affect eligibility? Have provisional tax and cash flow impacts been modelled to understand the full financial effect of accelerated purchases?
For building works, are planned improvements capital in nature (such as earthquake strengthening) that would qualify, or maintenance that wouldn’t? Has tax advice been obtained to confirm eligibility and optimal treatment before committing to significant expenditure?
How can businesses maximise Investment Boost benefits?
The detail matters with tax incentives. Asset eligibility, timing, and interaction with existing tax rules should be carefully considered to ensure you receive the intended benefits whilst avoiding unexpected complications.
We can help assess whether accelerating investment makes sense for your business and how best to incorporate the Investment Boost into wider tax and cash flow planning. This includes reviewing planned capital expenditure, modelling cash flow and provisional tax impacts, confirming asset eligibility and timing requirements, and coordinating with suppliers to ensure delivery and installation deadlines are met.
Call us and connect to possibility.
Wondering whether the Investment Boost could benefit your planned asset purchases? We can review your capital expenditure plans and model the tax and cash flow impacts of different timing scenarios. Give us a call or drop us an email, and we’ll set up a time to discuss how to make the most of this incentive before the 31 March deadline. You can also reach out to the author, Emma Simpson, via email at emma.simpson@uhyhn.co.nz for more information.
