NEWS

The 20% Investment Boost has been a welcome change for many taxpayers. It gives businesses an upfront tax deduction when buying new assets — which is great for cash flow.

But like most tax rules, there are a few “fish hooks” to watch out for. There are also some proposed amendments on the way.

Here’s a simple breakdown of how it works.

 

What Is the Investment Boost?

The scheme was announced on 22 May 2025.

It allows businesses to claim an immediate 20% tax deduction on the cost of eligible new assets. This is called a “partial expensing” regime — meaning you deduct part of the asset cost upfront and then continue to depreciate the remaining balance as normal.

The goal is to encourage businesses to invest in new capital assets (equipment, buildings, machinery, vehicles, etc).

An alternative option considered by the Government was reducing the company tax rate, but instead this targeted investment approach was introduced. There was no consultation before it was announced, which is why we’re now seeing remedial changes included in a Taxation Bill.

 

When Do the Rules Apply?

The rules apply to assets that:

• Are available for use on or after 22 May 2025, and
• Have never previously been used in New Zealand.

This means:

• You cannot claim the Investment Boost on second-hand assets purchased within New Zealand.
• You can claim it if you purchase a second-hand asset from overseas and bring it into New Zealand (as it hasn’t previously been used here).

 

What Does “Available for Use” Mean?

An asset is considered “available for use” when it is ready and able to be used to derive income.

Importantly, it does not need to be used — just capable of being used.

However, some changes to this definition have been proposed, so this is an area to keep an eye on.

Example:

If you commission a new piece of equipment and it becomes ready for use after 22 May 2025, you may qualify for the 20% Investment Boost.

 

Specific Situations

Demo Vehicles

In most cases, demo vehicles should qualify for the Investment Boost.

Commercial Buildings

If construction started before 22 May 2025, but the Code of Compliance Certificate is issued after that date, the Investment Boost can still be claimed.

This is because a building is not legally able to be used until the Code of Compliance is issued.

Even though commercial buildings have a 0% depreciation rate, they are still considered depreciable property — which means they qualify.

Finance Leases

Assets acquired under finance lease arrangements are eligible.

Additions to Existing Assets

Improvements or additions made after 22 May 2025 can qualify.

For example:

• Earthquake strengthening of a commercial building started after 22 May could qualify for the 20% deduction.

Mixed-Use Assets

If an asset is used for both business and private purposes, you can only claim the 20% deduction on the business portion.

For example:

• If part of a mixed-use property is commercial and part is residential, you can only apply the Investment Boost to the commercial portion.

 

What Assets Don’t Qualify?

The following are not eligible:

• Dwellings (residential property)
• Fixed-life intangible property
• Petroleum permits or privileges
• Mining permits or rights

 

What Happens When You Sell the Asset?

If you later sell an asset that you claimed the Investment Boost on, you may have to repay some of that benefit.

If the sale price triggers depreciation recovery (a clawback), the 20% deduction could effectively be reversed as part of that recovery.

This is important to factor into long-term planning — the benefit may not always be permanent.

 

Final Thoughts

The Investment Boost is a valuable opportunity for businesses investing in new assets. It improves cash flow and can make capital investment more attractive.

However, timing, asset type, and structure all matter. With proposed amendments underway, it’s important to get advice before committing to major purchases.

If you’re planning to invest in new assets, talk to your accountant first to ensure you qualify — and to structure things correctly from the start.

While these rules are currently in place, consider that with an election later this year, a potential government change could well change these rules within a short space of time.

 

Disclaimer

This information is intended to provide general advice only. We recommend you discuss your specific situation with your Accountant.