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Tax Planning Tax Deduction Investment Boost Deduction for New Investment Assets Business Growth Asset Deduction Investment Boost deduction Business Tax Relief

 

Investment Boost Scheme – Deduction for New Investment Assets

The IRD has issued guidelines around deductions for new investment assets under the Investment Boost Scheme.

  • Deduction Rate: 20% of the cost of a new investment asset.

  • Effective Date: Applies to expenditure incurred on or after 22 May 2025.

  • Objective: To encourage capital investment and raise productivity.

This is similar to an accelerated depreciation mechanism. The 20% deduction is in addition to normal depreciation.

Eligible Assets

The deduction applies to all depreciable property, except:

  • Dwellings (residential properties used for private living).

  • Fixed-life intangible property (FLIP) – i.e., intangible property whose useful economic life equals its legal life.

Included Assets

  • Commercial and industrial buildings (even though these generally have a 0% depreciation rate).

  • Improvements to depreciable property (e.g., upgrades or enhancements).

  • Primary sector land improvements.

  • Petroleum and mineral mining development expenditure (excluding rights, permits, or privileges).

Mixed-use Assets

  • If an asset is used partly for business, the deduction must be apportioned.

  • For mixed-use buildings, only the portion not considered a dwelling qualifies.

Example – Basic Asset

  • Asset cost: $10,000

  • Investment Boost: 20% × $10,000 = $2,000

  • Adjusted tax value (ATV): $10,000 – $2,000 = $8,000

  • Depreciation (say 30% DV method): 30% × $8,000 = $2,400

  • Closing ATV: $8,000 – $2,400 = $5,600

In following years, depreciation continues to apply on the reduced ATV.

Example – Building with Mixed Use

A taxpayer purchased a three-storey building on 1 April 2026 for $1.8 million.

  • Ground floor: offices (commercial use).

  • Middle floor: car park.

  • Top floor: long-term residential accommodation.

The top floor qualifies as a dwelling, and is therefore excluded.

The ground floor and car park serve business purposes, so they qualify.

  • Investment Boost deduction: 20% × $1.8m = $360,000

  • Eligible portion: ⅔ (commercial use).

  • Deduction claimable: ⅔ × $360,000 = $240,000.

Example – Improvement to Existing Asset

If a truck engine is replaced with a more powerful one, the new engine can be treated as a standalone depreciable asset (under section EE 37). The Investment Boost deduction would apply to this new engine, even though it forms part of the wider truck asset.

Recovery Rules

If an asset is sold for more than its adjusted tax value, depreciation recovery income arises. This includes the 20% Investment Boost deduction.

Example:

  • Asset purchased: $10,000

  • ATV after deduction: $7,600

  • Asset sold: $9,000

  • Recovery income: $9,000 – $7,600 = $1,400

For primary sector land improvements, however, Investment Boost deductions are not recoverable.

Key Differences vs Depreciation

  • Investment Boost: The full 20% deduction is available in the year the asset is first used or available for use, even if acquired late in the year.

  • Depreciation: Prorated based on the number of months the asset is used in the income year.

Example: 

If an asset is acquired in March 2025:

  • Investment Boost: full 20% deduction for the 2025 tax year.

  • Depreciation: only one month’s worth of depreciation.

Summary:

The Investment Boost is a front-loaded, one-off 20% deduction available for new investment assets (excluding dwellings and FLIP). It reduces the asset’s adjusted tax value, impacts future depreciation claims, and can result in depreciation recovery income on disposal.

New Zealand Tax Accountant.