The Investment Boost will allow New Zealand businesses to elect to take a 20% upfront deduction for new capital assets bought for their business. These assets must be used or available for use for the first time on or after May 22, 2025.
Businesses already committed to building new assets before this date may still be eligible, provided the asset meets the usage criteria.
The Investment Boost will apply to the purchase of most assets that are depreciable for tax purposes such as machinery, equipment and vehicles.
It will also apply to new commercial and industrial buildings even though normal depreciation for these assets is 0%.
In addition, improvements to depreciable property will be eligible for the Investment Boost if the asset being improved is also eligible.
An example of an eligible improvement would be significant strengthening of an industrial building used or available for use on or after May 22, 2025.
Assets that will be excluded from the Investment Boost are assets that have previously been used in New Zealand, including land, trading stock, residential buildings (dwellings), fixed life intangible assets (such as patents and trademarks), and assets that are fully expensed under other rules (such as assets that cost less than $1000 that are fully deductible).
For businesses currently claiming Research and Development tax credits, the good news is that the deduction will be an eligible expenditure.
While opponents might see the Investment Boost as a tax break for businesses, we see this as a positive incentive for businesses to invest in productive assets to boost the economy.
If the asset is a depreciable asset, then the taxpayer would have been able to depreciate the asset anyway.
Introduction of the Investment Boost will simply allow the deduction to be brought forward while still allowing for the amount to be clawed back in the same way depreciation is if the asset is sold.
While the devil will be in the details, we believe this is a positive move for businesses in New Zealand looking to retain funds and invest in their future, which is ultimately what NZ Inc needs.
While the early deduction will benefit those taxpayers already committed to expenditure, the hope is that the Investment Boost will also give hesitant businesses nervous about spending sufficient encouragement to invest in new assets.
• Jarod Chisholm is a tax advisory managing partner at Findex (NZ). The views and opinions expressed in this article are those of the author and do not necessarily reflect the thought or position of Findex.
