Investor Boost in the 2025 New Zealand Budget

Introduction
The 2025 New Zealand Budget, branded “The Growth Budget,” centres on catalysing business investment to drive productivity, wages and long-term economic expansion. At its heart lies the Investment Boost—a targeted tax incentive designed to encourage firms to purchase new productive assets by offering an immediate deduction of 20 percent of an asset’s cost. By front-loading deductions, the Government aims to improve cashflow for businesses, reduce the hurdle rate for capital expenditures and ultimately lift the nation’s GDP and wage growth over the next two decades.

What Is Investment Boost?
Investment Boost is a new tax deduction for all businesses. From 22 May 2025, businesses can claim 20% of the cost of qualifying new business assets as an expense, then claim depreciation as usual on the remaining 80%. In practical terms, if a business buys a $100,000 machine, it can immediately deduct $20,000 from taxable income and then depreciate the remaining $80,000 over the asset’s life.

Eligibility Criteria
To claim Investment Boost, the asset must be:

• new or new to New Zealand;
• available for the business to use on or after 22 May 2025;
• depreciable for tax purposes; and
• more than $1,000 in cost.

 
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 expenditure incurred on or after 22 May 2025 (except rights, permits or privileges)
• mixed-use assets.

 
There is no limit to the value of new investments you can claim Investment Boost for.

What you cannot claim for
You cannot claim Investment Boost for:

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

 
Claiming Process and Mechanics
You can claim Investment Boost in your income tax return for the year you buy a new asset. For example, if you buy a new asset on 23 May 2025, you can claim Investment Boost by adding the amounts to the relevant sections of your 2026 income tax return.
Depreciation claims proceed as usual on the reduced cost base, ensuring the taxpayer maximises cashflow benefits immediately while still capturing long-term depreciation relief.
If a business sells the new asset for more than its adjusted tax value (its cost minus the deductions and depreciation), they must declare the gain as taxable income on their tax return. This does not apply to primary sector land improvements.

Types of Qualifying Assets
Investment Boost broadens the spectrum of deductible assets, including:

• Machinery and Equipment: Production machinery, workshop tools, specialised manufacturing equipment.
• Commercial and Industrial Buildings: New non-residential buildings, refurbishments and seismic strengthening undertaken post-22 May 2025.
• Land Improvements: Depreciable improvements such as fencing, farm drainage, irrigation systems.
• Technology Assets: Servers, computers and manufacturing robots.
• Mixed-Use Assets: Items used partly for business and partly for private purposes, apportioned accordingly.

There is no cap on the value of assets that can qualify, making it attractive for large-scale investments as well as smaller capital upgrades.

Economic Impact and Fiscal Cost
The Government estimates the annual fiscal cost of Investment Boost at NZ$1.67 billion. Over the next 20 years, the policy is forecast to raise GDP by 1 percent and wages by 1.5 percent, with half of these gains realised within the first five years.

By improving after-tax returns on capital, the measure strengthens New Zealand’s attractiveness as a destination for both domestic and foreign investment—an objective reinforced by complementary initiatives such as Invest New Zealand, changes to international tax rules for infrastructure, and enhanced screen production rebates.

Comparison with Depreciation and Other Incentives
Unlike accelerated depreciation schemes that spread deductions over shorter periods, Investment Boost delivers the full 20 percent deduction in the acquisition year only. This approach balances present-period fiscal stimulus with controlled long-term outlays. The upfront nature contrasts with existing straight-line and diminishing-value depreciation methods, which allocate deductions across an asset’s useful life. By stacking the Investment Boost deduction on top of depreciation, businesses enjoy enhanced cashflow without altering the overall depreciation framework.

Strategic Implications for Businesses
Investment Boost provides a timely incentive for companies evaluating capital projects amid global uncertainty. The upfront deduction:

• Reduces Investment Hurdles: Lowers the net cost of assets, improving project internal rates of return.
• Enhances Cashflow: Frees up capital in the purchase year, enabling reinvestment or debt reduction.
• Encourages Expansion: Supports growth strategies in manufacturing, logistics, agriculture and technology sectors.
• Signals Government Support: Demonstrates a commitment to productivity-oriented tax policy, which may bolster business sentiment and confidence.

By aligning short-term incentives with long-term productivity goals, firms can accelerate technology adoption, facility upgrades and capacity expansions.

Potential Drawbacks and Considerations
While compelling, Investment Boost carries caveats:

• Timing Pressure: The incentive applies only to assets acquired or constructed on or after 22 May 2025, creating a rush for qualifying expenditures and potential supply-chain bottlenecks.
• Claw-Back Risk: Assets sold above their tax value trigger income inclusion, adding complexity to disposals.
• Exclusion of Intangibles: Key digital assets (e.g., patents) and residential rental buildings are excluded, limiting scope for certain sectors.
• Fiscal Sustainability: At NZ$1.67 billion annually, careful monitoring is required to ensure the measure’s economic benefits justify its cost.

Firms should integrate Investment Boost planning into their capital-expenditure cycles, weighing immediate tax benefits against broader investment timing and sector-specific constraints.

Conclusion
Investment Boost stands out as the flagship tax measure in the 2025 Budget, marrying simplicity with impact. By front-loading a 20 percent deduction for new assets, it tackles the twin challenges of improving business cashflow and incentivising capital investment. While large-scale fiscal outlay and sectoral exclusions demand prudent management, the initiative promises tangible GDP and wage uplift over the next two decades. For New Zealand businesses poised for growth, harnessing Investment Boost could mark the difference between stalled plans and accelerated expansion.

As the Government complements this policy with broader economic reforms—from infrastructure tax tweaks to science and technology accelerators—the Growth Budget signals a clear shift towards productivity and competitiveness on the global stage.
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If you wish to discuss any aspect of the above changes and how this may impact your business, please contact Nish Sethi on [email protected].