Unlocking Growth: New 20% Tax Deduction for Business Assets
Great news for New Zealand businesses: the Government’s 2025 Budget introduces a one-off 20% tax deduction for new qualifying business assets. This initiative, known as the “Investment Boost,” is designed to stimulate capital investment, enhance productivity, and support economic growth.
What Is the Investment Boost?
Effective from 22 May 2025, businesses can claim an immediate 20% tax deduction on the cost of new depreciable assets that are first available for use in New Zealand. This deduction is in addition to standard depreciation allowances. For example, if you purchase new machinery for $100,000, you can immediately deduct $20,000 from your taxable income, plus the usual depreciation based on the remaining $80,000.
Who Qualifies?
The Investment Boost applies to:
- New depreciable assets used in your business for the first time in New Zealand.
- Imported second-hand assets that have not been used in New Zealand before.
- Capital improvements to existing non-residential buildings, such as earthquake strengthening.
- Certain land improvements and other depreciable property.
Assets that do not qualify include:
- Residential buildings.
- Intangible assets (e.g., intellectual property).
- Assets already eligible for immediate deductions under other provisions.
Notably, new non-residential buildings will also qualify, even though they have a 0% depreciation rate for tax purposes.
Why It Matters
The Investment Boost is expected to:
- Increase New Zealand’s GDP by 1% over the next 20 years, with half of that impact occurring in the first five years.
- Raise wages by 1.5% over the same period.
- Encourage businesses to invest in new capital, leading to enhanced productivity and competitiveness.
This measure is part of a broader strategy to support economic growth without resorting to broad-based tax cuts. The Government estimates the fiscal cost to be $1.67 billion per year.
Important Considerations
- Clawback Provisions: If you sell a qualifying asset for more than its adjusted tax value, you may need to repay some or all of the deduction.
- Timing: The asset must be first available for use on or after 22 May 2025 to qualify.
- Depreciation Adjustments: The base for future depreciation deductions will be reduced by the amount of the 20% deduction.
Next Steps
- Review Your Capital Plans: Consider whether upcoming asset purchases or capital improvements can benefit from the Investment Boost.
- Consult Anthem team: Ensure that your business is correctly accounting for the new deduction and adjusting depreciation schedules accordingly.
- Stay Informed: Keep an eye on official guidance from Inland Revenue and consult with the Anthem team to maximise the benefits of this initiative.
This is a unique opportunity to reduce your tax liability while investing in the growth and efficiency of your business. If you need assistance in understanding how the Investment Boost applies to your specific situation, feel free to reach out.
