Investment Boost: What NZ Businesses Must Know About Accelerated Depreciation Changes
Investment Boost: What NZ Businesses Must Know About Accelerated Depreciation Changes
Written 9th July 2025
Updated 12 September 2025
Stephen Ryan
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From 22 May 2025, the New Zealand Government introduced the Investment Boost - a form of accelerated depreciation allowing businesses to deduct 20% upfront on new depreciable assets, then claim standard depreciation on the remaining value. This presents a powerful tax planning opportunity for your business.
What Has Changed?
What Has Changed?
The May 2025 Budget introduced the Investment Boost in the Taxation (Budget Measures) Bill No 2, effective immediately
Businesses can claim a 20% immediate deduction on new (or imported-new) depreciable assets purchased or available from 22 May 2025
Depreciation continues on the remaining 80% value at normal rates.
Qualifying assets include:
New machinery, tools, equipment, vehicles
Commercial and industrial buildings (even with 0% depreciation)
Land improvements, forestry plantings, aquaculture, and petroleum/mining development
Excluded assets include: previously used NZ assets, residential buildings, land, intangible assets, and low-value assets already immediately deductible
Why It Matters for Your Cashflow & Tax Planning
Why It Matters for Your Cashflow & Tax Planning
Accelerated depreciation isn't about giving bigger deductions overall (except in the case where the depreciation rate is 0%) - it brings deductions forward, improving cashflow and reducing tax payable in the year of purchase.
Example 1: Asset costing $100,000 with 10% straight line depreciation rate:
Without Boost: $10,000/year for 10 years.
With Boost: Year 1 = $20,000 (boost) + $8,000 (10% of the remaining ) = $28,000; then $8,000 annually for 9 years.
Example 2: Commercial Property costing $1m with 0% deprecation, sold for $1.1m 5 years later.
Without Boost: $0 depreciation throughout the lifetime. No adjustment at sale.
With Boost: Year 1 = $20,000; $0 for years 2 - 4; -$20,000 in year 5.
Practical Strategies to Maximise Benefits
Practical Strategies to Maximise Benefits
1. Plan Asset Purchases Around the Boost Window
1. Plan Asset Purchases Around the Boost Window
Make sure assets are new to NZ, purchased after 22 May 2025, and “available for use” before year-end.
2. Choose Asset-by-Asset
2. Choose Asset-by-Asset
The Boost is optional per asset; evaluate if immediate or gradual write-off fits your profit profile.
3. Utilise Commercial Building Eligibility
3. Utilise Commercial Building Eligibility
Typically commercial properties are non-depreciable, but now you can claim 20% upfront (of the building, not the land).
4. Track Mixed-Use Apportionment
4. Track Mixed-Use Apportionment
Partial business use requires proportionate deductions; asset sale may trigger clawback if use changes.
5. Watch for Clawbacks on Disposal
5. Watch for Clawbacks on Disposal
If you sell an asset above its adjusted tax value, part of the Boost may be recaptured as income.
How do I enter this into Xero? (Updated)
How do I enter this into Xero? (Updated)
Xero has released an article on how to claim the investment boost, which you can access by clicking here.
For More Information
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