May 29, 2025
After the budget announcement last week, we have been getting queries from clients regarding the announced Investment Boost, we thought we would break it down for you.
Here’s what it means in simple terms:
Extra Tax Deduction: If you buy a new asset (like equipment or tools) in New Zealand, or a new or used asset from overseas, you can claim an extra 20% tax deduction on the cost of that item.
How It Works: This 20% deduction will be handled like regular depreciation (how assets lose value over time for tax purposes). If you later sell the asset, the government might “claw back” part of that 20% depending on how much you sell it for.
When You Get the Deduction: You don’t have to record this 20% separately right away in your asset records—we’ll take care of that part when needed. But it’s important that you’re aware of it now.
Additional Depreciation: On top of the 20% deduction, you’ll still get the normal depreciation from the date you bought the asset.
What’s Next: The Inland Revenue (IRD) has released a factsheet that explains exactly which items qualify and which don’t. You can read it here.
EXAMPLE:
A farmer (company) has a balance date of 31 May 2026 and purchases a new Tractor on 1 June 2025 for $100,000 excluding GST.
In the tax year ended 31 May 2026, the farmer is going to be able to:
1. Claim 20% or $20,000 in depreciation immediately under the new Investment Boost scheme; and
2. Claim depreciation of 13% per annum on the asset’s book value. In the 2026 tax year, this is 13% x $80,000 = $10,400.
The slight difference under the 2nd point is that this 13% depreciation is now based on the remaining $80,000. GST is claimed on the full purchase price as normal.
At the company tax rate of 28%, this would mean a potential income tax saving for the farmer for 2026 of $5,600 on the Investment Boost deduction, plus $2,912 on the first year’s depreciation claim, so $8,512 total. Without the scheme, the farmer would claim $13,000 in depreciation (at 28%, a potential tax saving of $3,640).
Note: there are a number of exclusions to the investment boost scheme, including:
– Second-hand assets previously used in New Zealand
– Residential property
– Land
The rules will apply to assets which were first used or available for use on or after 22 May 2025.
It’s important to note: We are awaiting further details to confirm all of the above and to hone-in on some of the finer details.
