How to track and manage the 20% investment boost incentive.
In brief:
- New Zealand businesses can benefit from the new investment boost tax deduction, introduced on 22 May 2025.
- The tax incentive allows businesses to expense 20% of the cost of new assets upfront and depreciate the remaining 80% as usual.
- Although the investment boost is designed to support businesses, it also introduces complexity that advisers will need to help their clients navigate.
- The 2025 New Zealand budget introduced a new tax incentive aimed at accelerating business investment and improving productivity: the investment boost. This measure allows businesses to claim an upfront 20% tax deduction on the cost of expenditure on certain assets or improvements (new investment asset), in addition to normal depreciation.
- The incentive is available for both depreciable property and certain non-depreciable improvements (e.g. to farmland, aquaculture, forestry and listed horticultural plants). It excludes residential dwellings and low-value assets (under NZ$1000). While the 20% deduction is claimed upfront, the remaining 80% continues to be depreciated as per usual rules. Clawback applies if an asset is sold above its adjusted tax value.
- Example: if a business acquires a qualifying asset for NZ$100,000, it can deduct NZ$20,000 upfront in the 2025–2026 income year and depreciate the remaining NZ$80,000 using applicable methods.
Practical tracking and record-keeping
Business owners will need to track the investment boost portion of each asset to ensure proper recovery treatment on disposal. One option is to include two linked line items in the tax fixed asset register (e.g. 20% portion at 100% depreciation and 80% at standard depreciation). This assumes the full asset cost inclusive of the boost is capitalised for accounting. If the boost is expensed, then a separate add-back would be required if presented in the tax fixed asset register as above. The approach may vary depending on the ERP or asset register software used. Tracking may require naming conventions, tagging or manual adjustments. Evidence that the deduction was claimed on or after 22 May 2025 should be retained for audit support.
Recovery on disposal: avoiding surprises
On disposal, any previously claimed investment boost and depreciation are subject to clawback if the sale price exceeds the asset’s adjusted tax value. This requires businesses to retain detailed records of boost claims (on an asset-by-asset basis), particularly SMEs that may otherwise forget the upfront claim where expensed for accounting.
Example: an asset originally cost NZ$50,000, with a NZ$10,000 investment boost and NZ$32,000 in depreciation claimed. If it’s sold for NZ$25,000, the amount above the NZ$8000 adjusted tax value, i.e. NZ$17,000, will be clawed back as income. The risk is higher for entities with many assets or inadequate fixed asset tracking. A misalignment between tax and accounting treatments can complicate compliance, especially when the 20% deduction is expensed, rather than linked to the underlying asset.
Why commercial buildings qualify
Commercial buildings qualify for Investment Boost because they are still technically classified as depreciable property, notwithstanding that they have a tax depreciation rate of 0%. While this outcome appears bizarre where practically no tax depreciation is able to be claimed, access to the investment boost is justified on the basis that it applies universally to depreciable property and recognises the long-term economic contribution of commercial infrastructure. This outcome is clearly taxpayer favourable, given that the 20% deduction has also been stated to act as a form of accelerated depreciation to incentivise commercial investment. The decision to claim the investment boost remains optional, providing flexibility for businesses, depending on their tax strategy.
Common oversights
Several issues have already been identified in practice:
- Expensing the 20% deduction and not linking it to the relevant capital asset;
- Inadequate tracking in the asset register, or more generally
- No documentation of the claim year or audit evidence retained.
These oversights increase the risk of clawback errors, especially on asset disposal.
Outstanding questions and IR guidance
The process for disclosing an investment boost claim in tax returns is expected to be clarified by IR. Businesses may need to report claim details, asset types and dates. While formal success criteria have not been published, Treasury projects a 1% GDP uplift and 1.5% wage growth over 20 years. Uptake rates and behavioural responses are likely to be used to measure effectiveness.
Final thoughts
The investment boost represents a significant opportunity for businesses, but also introduces complexity in tracking, tax alignment and accounting treatment. Advisers should ensure clients understand both the benefits and compliance obligations – particularly in light of limited current guidance
Source: CAANZ Auckland & Northland Regional News Ed16 25.8.2025: Article by: John Cuthbertson CA is CA ANZ New Zealand’s Tax Leader. He is responsible for engaging with New Zealand’s Inland Revenue Department and Treasury on tax law reform, policy settings and administration.
Disclaimer
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