Investment Boost explained: timing equipment and expansion spending

What is Investment Boost?

Investment Boost is a tax incentive announced in Budget 2025 to encourage business investment. According to Inland Revenue, from 22 May 2025 businesses can claim 20% of the cost of new assets as an expense, then claim depreciation as usual on the remaining 80%.

In other words, you get a larger deduction in the first year, which reduces tax payable sooner. The total deductions over the asset’s life are broadly the same; the benefit is in timing.

What qualifies?

Inland Revenue’s eligibility guidance lists qualifying assets as new or new-to-New Zealand depreciable business assets first available for use on or after 22 May 2025, including:

• plant, machinery, equipment and vehicles used in the business
• new commercial and industrial buildings
• improvements to depreciable property, but not residential buildings
• primary sector land improvements
• mixed-use assets, subject to apportionment

It does not apply to:

• second-hand assets sourced from New Zealand
• residential rental buildings
• most fixed-life intangible assets, such as patents

Assets must not have been used in New Zealand before, other than minimally.

A simple illustration

Illustrative figures only; your accountant will calculate the real numbers.

A manufacturer buys a new machine for $200,000, first used in the business during the year.

The higher first-year deduction reduces taxable income in that year. At the 28% company tax rate, each additional $10,000 of deductions reduces tax by $2,800.

Why timing matters for SMEs

The benefit arrives later than the cost. You pay for the asset when you buy it, but the tax saving shows up when your provisional or terminal tax is calculated. That gap needs to be funded, which is where expansion finance comes in.

Year-end timing. An asset first available for use just before balance date gets the Investment Boost deduction in that year. If a purchase is planned anyway, bringing it forward can accelerate the benefit. Do not buy assets purely for the tax benefit, though; the business still has to need them.

Provisional tax. If you pay provisional tax, a large Investment Boost claim may reduce what is due. Talk to your accountant about adjusting payments rather than waiting for a refund.

Planning an expansion around Investment Boost

1. List the assets the expansion needs and check which are new and qualify.
2. Estimate the tax effect with your accountant.
3. Build a cash flow forecast showing the purchase, the funding and the later tax benefit. Our 13-week forecasting guide can be extended for this.
4. Arrange funding first. Commit to purchases only when funding is confirmed.
5. Keep records of purchase dates, invoices and when each asset was first available for use.

How to fund qualifying investment

For established SMEs, the usual routes are:

• Property-secured loans from $20,000 to $1m, as a first or second mortgage over a home, rental, commercial property or land. Suited to larger projects such as a new site or a building. See property-secured loans.
• Unsecured facilities based on turnover and bank statements, for businesses usually trading six months or more. Suited to smaller equipment purchases. See unsecured loans and lines of credit.
• A mix, with a term facility for the asset and a line of credit for the working capital the expansion needs.

Every loan is priced on the individual business and its circumstances.

The bigger picture

Investment Boost arrived at a time when business investment intentions were recovering. The ANZ Business Outlook for August 2026 showed investment intentions positive, though cost expectations were very high. Rising costs make it more important that any investment genuinely lifts productivity or capacity. The tax benefit is a bonus, not the reason.

Get advice

Tax rules have detail and exceptions. This guide is general information; your accountant should confirm eligibility and the calculation for your business before you rely on Investment Boost in a funding decision.