Budget Alert 2025 - Investment Boost
A core initiative for Kiwi businesses, Investment Boost is a new tax incentive to encourage investment in assets to increase productivity.
It allows a one-off deduction of 20% of the asset’s cost in the year of purchase, along with depreciation deductions going forward, calculated as if the cost of the asset were reduced by 20%. The deduction is eligible expenditure for the purposes of research and development tax credits. But what can you actually use it for, and how are you best to use it to your advantage?
What can you claim?
From 22 May 2025, you can claim 20% of the cost of new assets as an expense, then claim depreciation as usual on the remaining 80%.
To claim Investment Boost, the asset you purchase must be:
New or new to New Zealand
Available for the business to use on or after 22 May 2025, and
Depreciable for tax purposes.
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)
How to maximise this tax incentive?
So, that’s the lowdown on how the Investment Boost scheme works. But how can you use this tax incentive to make a tangible difference for your small business?
Here are five ideas to get you started:
1. Invest in technology and AI to boost your productivity:
Use the 20% tax deduction to buy new machinery, software (including AI tools) and equipment. This direct cashflow benefit makes modernising your operations more affordable and, with new, cutting-edge equipment and tech, you can give yourself a real competitive edge.
2. Increase wages and attract new talent:
By investing in new assets that boost productivity, your business can generate more revenue and improve profitability. This financial uplift helps you offer competitive wages and benefits, making your business a more attractive employer in the currently tight labour market.
3. Upgrade and future-proof your business:
In an unstable economic climate, the Investment Boost encourages proactive investment. By replacing aging equipment, upgrading commercial buildings, or investing in new infrastructure you’re better prepared to weather the economic ups and downs that lie ahead.
4. Investment in sustainable assets to assist with climate change threats:
Use the tax savings from the Investment Boost to invest in environmentally friendly assets. This could include purchasing electric vehicles for your fleet, installing energy-efficient machinery, or investing in renewable energy solutions for your premises.
5. Reinvest in growth and new revenue streams:
The lower tax bill from the Investment Boost frees up more capital. Reinvest these savings into areas that fuel growth. This could include expanding your product lines, entering new markets, increasing marketing efforts, or providing advanced training for your team.
How can BFA help you with tax planning?
Getting strategic with your tax planning has many advantages for your financial stability as a business. But to maximise your planning, it’s important to work with an experienced adviser. As your tax advisor, we’ll help you look ahead across the whole financial year, looking for the opportunities to reduce your tax liability and find the best tax deductions and incentives.