NZ Budget 2025: New “Investment Boost” Depreciation Incentive Explained

Introduction

On Budget Day, 22 May 2025, the Government announced a suite of tax measures aimed at stimulating investment. Central to these is the new “Investment Boost”—a depreciation incentive that allows businesses to claim an immediate deduction equal to 20 percent of the cost of qualifying assets.

How the Incentive Works

• Immediate 20 % deduction in the income year the asset is purchased.

• Standard depreciation still applies—but on a reduced base (original cost minus the 20 %).

• Effective date: Assets first used, or available for use, on or after 22 May 2025.

• No upper limit on asset value or number of assets claimed.

Eligible Assets

• New plant, machinery, vehicles, tools and equipment.

• New commercial and industrial buildings, plus significant capital improvements.

• New assets imported from overseas (second‑hand imports are eligible if never used in NZ).

Exclusions

• Land and trading stock.

• Residential buildings (with limited exceptions such as hotels and hospitals).

• Intangible property (e.g. software, patents) and low‑value assets already fully deductible.

• Assets already in use in New Zealand before purchase.

Cash‑Flow Impact

he Treasury estimates the policy will cost an average NZ$1.7 billion per year in foregone revenue, but the Government expects the upfront deduction to improve business cash flow and encourage faster capital investment.

**Example**

An engineering firm buys a new CNC machine for NZ$500,000:

1. Immediate Investment Boost deduction: NZ$100,000 (20 %).

2. Remaining cost base for normal depreciation: NZ$400,000.

This upfront NZ$100,000 deduction reduces taxable income in the purchase year, freeing cash for further growth.

What Businesses Should Do Now

1. Review capital expenditure plans—bringing forward purchases may accelerate deductions.

2. Check asset eligibility—ensure items are genuinely new (or new to NZ) and not excluded.

3. Maintain documentation—retain invoices and evidence that assets were first used on/after 22 May 2025.

4. Model tax impact—forecast cash‑flow benefits and consider financing options.

Final Thoughts

Investment Boost offers a timely cash‑flow advantage for firms planning to modernise their asset base. While the 20 percent deduction is generous, it pays to confirm eligibility before signing purchase orders. Speak with your tax adviser to maximise the benefit and stay compliant.