The 20% Investment Boost Explained: How to Claim It (and Avoid Common Mistakes)

Published On - July 31, 2025

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There’s a new tax incentive for businesses, and it could boost your cashflow if you play it right.

The “Investment Boost” offers a 20% upfront deduction on eligible new business assets. But it comes with rules, limits, and potential pitfalls.

In this article, I’ll unpack the key details and give you a clear plan for how to make it work for your business. And share my overall verdict on whether it’s actually helpful or just another headline grab.

Specifically, I’ll cover:

  • What is the Investment Boost?
  • 5 Types of Assets That Qualify (and 5 That Don’t)
  • 5 Scenarios Where You can Actually Benefit (and 5 Where You Won’t)
  • What to Watch Out For (6 Common Mistakes)
  • How to Use this Wisely (6 Recommendations)
  • My Overall Verdict: Helpful, or Not?

    What is the Investment Boost?

    The Basics: 20% Upfront Deduction Explained

    From 22 May 2025, businesses that buy new capital assets can claim an additional 20% tax deduction upfront in the year the asset is available for use. This is on top of regular depreciation.

    It’s important to note: this isn’t extra money, it simply brings some of your future depreciation forward into the first year.

    Example:

    You buy a $100,000 machine

    –> Claim $20,000 immediately

    –> Depreciate the remaining $80,000 over time as usual.

    There’s no cap on the amount. But not everything qualifies. And it’s not a cash rebate. It’s still just a deduction.

    To put this in perspective: If you buy a $50,000 asset, the 20% boost means you can deduct $10,000 upfront. At the 28% company tax rate, that’s a cash saving of $2,800 this year. Helpful, but for most businesses, not game-changing.

    5 Types of Assets That Qualify

    What You Can Claim Under Investment Boost

    To qualify, the asset must be:

    1. Brand new (not used in NZ before)
    2. Used to generate taxable income
    3. A depreciable asset valued at $1,000 or more
    4. First available for use on or after 22 May 2025
    5. Tangible i.e. physical, not intangible.

    Examples of qualifying assets:

    • New tools, vehicles, or equipment
    • Office fit-outs, furniture
    • Computers and tech gear
    • Commercial buildings and improvements
    • Imported second-hand machinery (if never used in NZ)

    5 Types of Assets That Don’t Qualify

    What You Can’t Claim (and Grey Areas to Watch)

    Be careful. These are specifically excluded:

    1. Residential rental properties
    2. Chattels for residential rentals (very grey area)
    3. Assets under $1,000 (already 100% deductible)
    4. Intangible assets like software or Intellectual Property (IP)
    5. Second-hand items already used in New Zealand

    Examples:

    • If you’re a tradie buying a brand-new ute, you likely qualify.
    • If you’re a café fitting out a new commercial premises, you likely qualify.
    • If you’re a landlord installing a heat pump in a rental? Not so clear, and likely excluded.

    Important: IRD has yet to issue final guidance on some grey areas, such as whether brand-new chattels (like ovens or heat pumps) in residential rentals qualify. Until clarified, assume they may be excluded and get advice before claiming.

    5 Scenarios Where You Can Benefit

    When the Investment Boost Works in Your Favour

    This is where it gets practical. You’ll benefit most if:

    1. Your business is profitable and paying tax this year. You can claim the 20% deduction straight away and reduce this year’s tax bill.
    2. You were already planning to invest in a qualifying asset. The boost improves your cashflow (it doesn’t create it), though it can bring tax relief forward.
    3. You’re planning to buy new, not second-hand.
    4. You already have cash or financing available.
    5. You’re investing in high-cost, long-life assets. Big-ticket items like commercial buildings or plant get more value from the upfront timing advantage.

    5 Scenarios Where You Likely Won’t Benefit

    When the Boost Won’t Help You Much

    You won’t benefit (or not much) if:

    • You’re in a tax loss position. The deduction just increases your losses carried forward. No immediate cash benefit.
    • You typically buy second-hand or below $1,000 items. These are either excluded or already fully deductible under existing rules.
    • You can’t afford to invest in new gear right now, or if you’re holding off investment due to tight cashflow.
    • You’re buying for a residential rental. Residential property is explicitly excluded and associated chattels may be too (depending on final IRD guidance).
    • You plan to sell the asset soon. Any gain above book value could trigger a claw-back, cancelling out much of the benefit.

    The key thing to remember:

    A tax deduction doesn’t help you buy the asset. It only saves tax later. (after you’ve spent the money).

    What to watch out for (common mistakes)

    6 Traps That Could Trip You Up

    Even if you’re eligible, there are traps to avoid:

    1. Prove it’s “new to NZ”: If the item is bought through a third party, you must prove it wasn’t previously used in New Zealand. Keep invoices, supplier statements, or import documents on file. IRD may ask for proof.
    2. Get the timing right: The asset must be first available for use on or after 22 May 2025. If you had it before that, you miss out.
    3. Update your depreciation correctly: You claim 20% upfront, then depreciate the remaining 80% over time. Your accountant or accounting software needs to handle this split properly.
    4. Surprise tax bill on sale: If you sell the asset later for more than its book value, the IRD claws back the earlier deduction as taxable income.
    5. It favours long-life, big-ticket assets like commercial buildings: Short-life or low-value don’t get the same benefit. So the value of the incentive isn’t equal across the board.
    6. Assuming the benefit is bigger than it is: This is a timing benefit, not a bonus depreciation. You’re just bringing forward part of what you’d normally claim over time.

    How to use this wisely

    Smart Ways to Make the Most of the Boost

    Don’t let a tax break drive a bad business decision. Saving tax on a bad purchase is still a bad deal. This tax break is worth using if you were already planning to invest in new assets.

    Here’s what I suggest on how to make the most of it:

    • Confirm eligibility before you buy, especially for grey areas like property or imports.
    • Check your profitability. If you’re in a loss, you won’t get immediate value
    • Run the numbers, see if the tax benefit improves your ROI or cashflow
    • Make sure your records and depreciation schedules are up to date
    • Talk to your accountant, especially for larger or complex assets
    • Use it for planned investments. Not as an excuse to spend unnecessarily.

    Want help figuring out if you should use it, or how?

    Final thoughts

    Bottom Line: Helpful, But Not for Everyone

    The Investment Boost is a decent incentive. But only if you’re in a position to use it. It’s not a silver bullet. It doesn’t solve cashflow, doesn’t help if you’re not profitable, and doesn’t apply to every business or asset.

    Remember, this is a timing benefit, not free money. It can help your cashflow, but it won’t create funds you don’t already have.

    In typical fashion, the headlines sound great, but the real value lies in understanding the fine print and applying it wisely.

    Regards,

    Baqir Hussain, FCCA

    About Me

    I’m Baqir Hussain, making tax simple for everyday New Zealanders. Share this article if you found it helpful.