23/05/2025
Government Proposal: Investment Boost for New Asset Purchases
Immediate Tax Deduction for New Business Assets
The Government has announced that, effective immediately, businesses will be able to claim an upfront tax deduction of 20% on the cost of new assets or improvements to existing ones. The remaining asset value will still be eligible for standard depreciation deductions (where applicable). While commercial buildings remain non-depreciable, they will qualify for the 20% investment boost.
To provide clarity and certainty for businesses, the proposed changes will be formalised through urgent Budget legislation — the Taxation (Budget Measures) Bill (No 2) (“the Tax Bill”) — which is expected to be enacted swiftly.
The Government projects that this move will increase GDP by 1% and wages by 1.5% over the next two decades. According to Walker, “Officials advised the Minister of Finance that a 20% upfront deduction is the most effective way to stimulate business investment.”
Eligibility Criteria
The Investment Boost will apply to most new assets that qualify for tax depreciation, including commercial buildings.
Key criteria include:
• The asset must be new or new to New Zealand (second-hand assets do not qualify).
• In the year the asset is acquired, 20% of its cost can be claimed upfront, with the remainder depreciated as normal.
Example:
For a $100,000 asset with a 10% depreciation rate, a business can immediately deduct $20,000. Depreciation on the remaining $80,000 would allow an additional $8,000 deduction in the first year, totalling $28,000 in year-one deductions — compared to just $10,000 under current rules.
Exclusions from the Boost
While full details will be provided in the Tax Bill commentary, the following are expected to be excluded:
• Assets previously used in New Zealand
• Land (although improvements to land are eligible)
• Trading stock
• Residential buildings (except for specific uses such as hotels, hospitals, and rest homes)
• Fixed-life intangible assets (e.g. patents)
• Assets already expensed under other rules (such as low-value assets under $1,000)
Additional Key Points
• The rule is optional and available to businesses of all sizes.
• There is no asset value limit for eligibility.
• The rules apply to assets first used or available for use from 22 May 2025 onwards. The Tax Bill will clarify eligibility for assets in mid-purchase or under construction.
• Capital improvements to existing assets (e.g. seismic strengthening) are eligible.
• Standard depreciation recovery rules apply if the asset is later sold for more than its book value.
• The rules also extend to certain industry-specific expenditures, such as:
• Improvements to farm and forestry land (e.g. fencing)
• Listed horticultural plantings
• Aquaculture developments
• Petroleum and mineral mining development costs
• The 20% Investment Boost deduction may be included in R&D tax incentive claims.
