If you are buying equipment, tools, vehicles, or other assets for your business, there is a tax incentive that can save you real money. The Investment Boost, introduced in Budget 2025, lets you claim an immediate 20% deduction on the cost of eligible new business assets.
Key takeaways
- The Investment Boost is a 20% immediate tax deduction on the cost of qualifying new business assets.
- It applies to assets first available for use from 22 May 2025 onwards.
- You claim the 20% upfront and depreciate the remaining 80% as normal over the asset’s useful life.
- Most new productive assets qualify. Land does not, and most second-hand NZ goods do not.
- The boost does not increase total deductions over the life of the asset. It accelerates them, improving cash flow now.
For anyone planning capital purchases, understanding how this works is the difference between a routine depreciation claim and a meaningful upfront tax saving.
What is the Investment Boost?
It is a one-off 20% deduction on qualifying new business assets, claimed in the year the asset is first available for use. The remaining 80% of the asset’s cost is then depreciated as normal over its useful life.
The policy is designed to encourage business investment by bringing forward a chunk of the tax benefit. Instead of waiting years to deduct the full cost through depreciation, you get 20% immediately, plus normal depreciation on the rest.
What assets qualify for the Investment Boost?
For an asset to qualify:
- It must be new, or new to New Zealand. Imported assets that have not been used in NZ before generally count.
- It must be depreciable for tax purposes.
- It must be first available for use from 22 May 2025 onwards.
- It must be used primarily for business purposes.
This covers a wide range of assets: laptops, machinery, commercial vehicles, tools, office furniture, manufacturing equipment, fit-out work for new premises, and more. Land does not qualify, though some land improvements like fencing may.
What does not qualify?
- Assets already used in New Zealand before purchase (second-hand NZ goods).
- Assets fully expensed under the $1,000 low-value asset write-off, which is usually the better option for small purchases anyway.
- Assets not used primarily for business.
- Land (excluding qualifying land improvements).
- Residential property.
- Most intangible assets, with some exceptions.
How do I calculate the Investment Boost?
Take the GST-exclusive cost of the asset. Apply the 20% deduction. Depreciate the remaining 80% at IRD’s standard depreciation rate for that asset type.
Worked example: a $10,000 piece of equipment with a 20% depreciation rate purchased 1 April 2026.
- Investment Boost deduction: $10,000 × 20% = $2,000.
- Depreciation base: $10,000 − $2,000 = $8,000.
- First-year depreciation: $8,000 × 20% = $1,600
- Total first-year deduction: $2,000 + $1,600 = $3,600 (instead of $2,000 under depreciation alone).
At a 33% marginal tax rate, that extra $1,600 of first-year deduction is worth around $528 in additional tax savings, brought forward.
What if I use the asset partly for personal purposes?
If the asset is used partly for personal purposes, you can only claim the business-use portion. A vehicle used 60% for business and purchased for $45,000 would have an eligible base of $27,000. The 20% boost on that is $5,400.
You then depreciate the remaining 80% of the business-use portion (in this example, $21,600) at the normal rate. The personal-use portion is not deductible at all.
How do I claim the Investment Boost?
Include the deduction in your income tax return for the year the asset was first available for use. Make sure your asset register is up to date with the purchase date, cost, business-use percentage, and depreciation method.
For purchases that were ready for use between 22 May 2025 and 31 March 2026, the boost is claimed in your 2025/26 return. For assets becoming available from 1 April 2026 onwards, the boost falls into your 2026/27 return.
The phrase “first available for use” matters. Buying a piece of machinery on 30 March that does not arrive until 5 April means the deduction goes in the 2026/27 year, not the 2025/26 year.
Is the Investment Boost actually worth it?
If you were already planning to buy the asset, absolutely. The boost does not change the total amount you can claim over the life of the asset. It accelerates the deduction so you get more of the tax benefit sooner. That improves cash flow in the year of purchase.
If you are buying purely to claim the boost, do the maths first. The tax saving is around 6-8% of the asset cost (20% deduction × your marginal tax rate). That means you are still spending most of the money. Buying assets you do not need to chase a tax deduction usually ends badly.
Does it stack with the $1,000 low-value asset write-off?
No. If an asset is fully expensed under the $1,000 low-value write-off, you cannot also claim the 20% Investment Boost on it. For purchases under $1,000 that qualify as standalone low-value assets, the low-value write-off gives you 100% deduction in year one, which is usually better than 20% Investment Boost plus depreciation. Use the low-value write-off for qualifying small assets and reserve the Investment Boost for larger purchases or anything that doesn’t meet the low-value rules.
Frequently asked questions
Does the Investment Boost apply to vehicles?
Yes, qualifying new commercial vehicles are eligible. Passenger vehicles can also qualify, though apportionment rules apply if there is personal use, and there are caps on the deductible cost of luxury motor vehicles. A new ute used 100% for business gets the full 20% boost on the GST-exclusive cost.
Can I claim the Investment Boost on second-hand assets?
Generally no for assets that have already been used in New Zealand. You can claim it on assets imported from overseas that are new to New Zealand, even if they have been used overseas first, provided they meet the other criteria.
What happens if I sell the asset later?
Standard depreciation recovery rules apply. If you sell for more than the asset’s tax book value, you may have depreciation recovered as taxable income. The Investment Boost reduces the asset’s opening tax book value, which affects how much depreciation recovery applies on disposal.
Do I need to claim the boost in the year of purchase or can I delay it?
You claim it in the year the asset is first available for use. You cannot defer the deduction to a later year if it would be more beneficial. If you have a tax loss in the year of purchase, the deduction adds to your loss and can be carried forward to future years under standard loss carry-forward rules.
Start a free trial at afirmo.com.