The scheme has opened the way for businesses to consider tax incentives for upgrading, improving or increasing business assets such as transport, machinery and other investments.
In the new tax deduction, businesses can claim 20% of the cost of new assets bought from May 22 as an expense, then claim depreciation as usual on the remaining 80%.
The incentive is being credited in part for a boost in vehicle sales in June. A total of 11,862 vehicles including commercial vehicles were registered, up just over 25% on 9415 vehicles for the same month a year ago.
Business Canterbury, formerly the Canterbury Employers’ Chamber of Commerce, held a session for about 40 members on the new scheme with Deloitte specialists providing advice on which investments qualified.
Chief executive Leeann Watson said there was strong interest among business at this early stage to be part of the scheme.
She said the scheme was giving businesses confidence to bring forward investment.
“For example, one of our members is overseas buying a piece of machinery and they had that on the radar, but have brought forward that investment sooner than later because it frees up some cashflow. We talked to another quite big business looking at some commercial buildings and they will use that as a way to help with their cashflow.”
Further feedback from another large business was the scheme had not changed its appetite to invest, but it believed the cashflow benefit would free up capital allowing the business to use the depreciation to redirect it into other investments, she said.
Most depreciable assets could be bought including plant and equipment, commercial buildings, improvements to existing assets and second-hand assets sourced from outside New Zealand such as imported vehicles.
Excluded from the scheme are land purchases, residential dwellings, some fixed-life items such as software licenses and patents and petroleum and mining permits.
The government expects the Investment Boost will lift GDP by 1% and wages by 1.5% over the next 20 years.
Ms Watson said businesses were pleased commercial buildings were included as they were not initially expected.
“In Canterbury there is still quite a strong pipeline of commercial buildings going up in and around the commercial city and that is a significant opportunity for those businesses because you are talking … in the millions of dollars.”
Demand for commercial property could rise as a result, she said.
“We are seeing that consumer demand is still quite slow and what this will do is help stimulate the economy and get people to make those investment decisions sooner rather than wait until things are more certain.”
Inland Revenue is expected to release more guidelines either later this month or in August.
