WHAT DOES THE 2025 INVESTMENT BOOST MEAN FOR BUSINESS?

What does the 2025 investment boost mean for business? Investors and business owners have been wondering about this since the 2025 Budget introduced one of the most substantial support measures for businesses in recent years—the “Investment Boost.” If you are an investor and/or own a business and are considering buying new assets like equipment, vehicles, or machinery, this new initiative could significantly reduce your tax bill and help improve cash flow.

But as with most tax rules, the devil is in the detail.

In this article, we explain what the Investment Boost is, who it applies to, how it works, and what businesses should consider before making investment decisions. Whether you’re a sole trader, company director, or finance manager, our goal is to help you make smart, compliant decisions that benefit your bottom line.

📌 What is the Investment Boost?

The Investment Boost is a tax deduction measure designed to support small and medium-sized businesses. It provides an additional 20% tax deduction on eligible new asset purchases made on or after 22 May 2025

This deduction is on top of the usual depreciation expense, meaning businesses can effectively “accelerate” their claim for asset costs in the current financial year.

📊 The Basics:

• Applies to new depreciable assets acquired and ready for use on or after 22 May 2025
• 20% immediate deduction in the year the asset is used or available for use
• Normal depreciation continues to apply over the asset’s useful life
• Intended to encourage businesses to invest in productivity-enhancing assets

✅ Who Is Eligible?

The measure is targeted at small to medium-sized enterprises (SMEs) and applies only to businesses with annual revenue under $20 million. This includes sole traders, partnerships, trusts, and companies.

To qualify:

• Your business must be actively trading
• Annual gross income must not exceed $20 million
• You must purchase new (not second-hand) depreciable assets
• The asset must be used in your business and not for private purposes
• The asset must be ready for use between 1 April 2024 and 31 March 2025

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🧾 What Kind of Assets Are Eligible?

Eligible assets must be:

• New and depreciable
• Physically used in your business operations
• Not primarily for private use
• Not low-value pooled assets (i.e. costing less than $1,000)

Examples include:

• Vehicles used for business (e.g., delivery vans, fleet cars)
• Machinery (e.g., food processing equipment, manufacturing tools)
• Office equipment (e.g., servers, printers, commercial-grade furniture)
• Farming and construction equipment

🚫 What’s Excluded?

Certain assets are specifically excluded:

• Second-hand or used assets
• Assets used mainly for private purposes
• Land and buildings
• Intangible property (like software or goodwill)
• Low-value assets pooled under IRD rules

🚗 What About Business Vehicles?

This is a common area of interest—and potential confusion.

If you’re thinking of upgrading your work vehicle or adding to a fleet, the Investment Boost may provide a meaningful tax advantage—but only if:

• The vehicle is new (car-yard demo vehicles qualify; see below for more info)
• It is used primarily for business
• It is not leased from someone else (you must own it)

Example: Buying a $60,000 ute

Let’s say your plumbing business buys a new ute for $60,000 + GST:

• You get an immediate $12,000 tax deduction (20% of the asset cost)
• Plus, you still claim regular depreciation each year

That’s a solid boost to your tax position in year one, especially when paired with other legitimate business expenses.

💡 How Is the 20% Deduction Applied?

The 20% Investment Boost is a standalone deduction claimed in the income year the asset is first used (or available for use). It does not reduce the asset’s tax book value—which means you still depreciate it as usual in following years.

Here’s how it works in practice:

Asset Cost (excl. GST)	Investment Boost (20%)	Remaining Book Value	Depreciation in Year 1
$50,000	$10,000	$50,000	$5,000 (based on 10% DV)

Note: Depreciation rates vary by asset type—check IRD’s depreciation guides or speak to us for your exact situation.

🏗️ Real-World Examples

Example 1: Retail Business

A small retailer upgrades their POS system, shelving, and commercial fridge:

• POS System: $10,000 → Investment Boost = $2,000
• Shelving: $6,000 → Investment Boost = $1,200
• Fridge: $12,000 → Investment Boost = $2,400

Total additional deduction: $5,600

This could equate to thousands in tax savings, depending on the business’s marginal tax rate.

Example 2: Tradesperson

A builder buys a new trailer and cement mixer:

• Trailer: $7,500 → Investment Boost = $1,500
• Mixer: $5,000 → Investment Boost = $1,000

Total additional deduction: $2,500

🔍 Strategic Considerations Before You Buy

While the 20% boost is enticing, don’t let tax savings drive business decisions. Here’s what to weigh up:

1. Genuine Business Need

• Do you need this asset to grow, scale, or improve operations?
• Will it help reduce costs or improve efficiency?

2. Cash Flow

• Can you afford to buy the asset outright, or will you need to borrow?
• Interest costs could offset some of the tax benefit.

3. Fringe Benefit Tax (FBT)

• Vehicles used privately (even part-time) could trigger FBT obligations
• This is especially relevant for owner-operators with dual-use vehicles

4. Timing

• The asset must be available for use on or after 22 May 2025

5. GST Implications

• The deduction is based on the GST-exclusive cost if you’re GST-registered
• GST must still be accounted for separately

📋 Compliance Checklist

To ensure your asset qualifies, keep thorough records:

• Invoice showing date and cost of the asset
• Asset register noting when it was acquired and put into use
• A statement or logbook for any dual-use assets like vehicles
• Any loan documentation if financed
• Photographic evidence or delivery dockets (especially useful if timelines are tight)

🧮 Accounting and Tax Planning Tips

As accountants, we recommend the following to maximise your position under the Investment Boost scheme:

📅 Align With Your Tax Year

• You may want to bring forward purchases into the current financial year to benefit

📁 Bundle Large Purchases

• Consider consolidating necessary upgrades into one year (e.g., office refurb, equipment overhaul)
• This may unlock a greater benefit and simplify asset management

🛠️ Asset Pooling Strategy

• Remember: low-value assets under $1,000 must be pooled and are not eligible for the boost
• Where possible, bundle smaller costs into larger asset acquisitions to qualify

🧭 Summary: Key Takeaways

Item	Details
Name	Investment Boost
When	Budget 2025
Rate	Additional 20% deduction
Period	From 22 May 2025
Eligibility	Businesses with annual revenue under $20M
Applies to	New depreciable assets only
Excludes	Second-hand items, buildings, land, pooled low-value assets
Claimed	Year the asset is available for use

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📞 Next Steps: Talk to Your Accountant Early

Tax rules often look straightforward on paper but get tricky in practice—especially when timing, GST, FBT, and asset classifications come into play.

We’re here to help you:

• Assess whether your planned purchases qualify
• Calculate your tax benefit
• Structure your purchases to maximise return
• Stay compliant with IRD’s documentation requirements

This is a limited-time opportunity to get a valuable tax deduction and improve your business at the same time—but planning is key.

💬 Final Thoughts

The Investment Boost is a welcome policy that offers real, immediate value to New Zealand’s SME sector. In a climate of rising costs and cautious optimism, this incentive provides breathing room to invest confidently in your business’s future.

But like any tax incentive, it’s only effective when it aligns with broader business goals. Before you commit to that new vehicle, piece of equipment, or software suite—get tailored advice and make sure it’s the right move for your business.

If you’d like to chat about how you or your business can benefit, feel free to reach out to our team today.

Sources and Further Reading:

• Inland Revenue: Investment Boost Overview
• Miles Group: Vehicle Investment and Tax Implications
• Deloitte NZ: Budget 2025 Commentary

Car-yard Demo Vehicles

There is an exclusion to ensure that an asset which is sold but has been used as trading stock is still eligible. For example, a car yard will have vehicles available to be test driven prior to sale. As these are being held by the car yard as trading stock (rather than a depreciable asset of the car yard), when that vehicle is sold to its first owner, the new owner will be eligible to claim the Investment Boost (if they are using the vehicle for business purposes).