Investment Boost: Frequently asked tax questions

Since Budget 2025 revealed Investment Boost as the centrepiece of the Government’s plan to stimulate the economy, we’ve been inundated with questions from people and businesses wanting to understand more about what this is and how it works.

At its heart, Investment Boost is a set of tax rules which allow upfront expensing of 20% of a new assets cost. In most cases, this is bringing forward the ability to claim depreciation deductions. 

Here are some of the frequently asked tax questions related to the application of Investment Boost. There will be flow on consequences for taxpayers to consider, such as the impact on the level of provisional tax payable.

What does this apply to?

Almost all New Zealand new depreciable assets that first become available for use on or after 22 May 2025 will qualify for Investment Boost. Secondhand assets are not eligible unless they are new to New Zealand. The rules also apply to improvements to farmland, planting, aquacultural businesses and forestry land and assets associated with petroleum development and mining development (which operate under different tax rules to depreciation).

Commercial buildings are eligible for Investment Boost. These are still depreciable assets, but the tax rate is set to 0%.

Improvements to any qualifying asset classes also qualify for Investment Boost.

These are collectively known as “new investment assets”.

Excluded from Investment Boost are:

• Land
• Residential property
• Fixed life intangible property
• Petroleum and mining rights and permits

What is the benefit?

Investment Boost provides the ability to claim a deduction for 20% of the asset cost in the year of acquisition. In most cases, this is a timing difference as it is just changing the profile of when depreciation deductions are claimed so they are front loaded; however, this is more than a timing difference for any owners of new commercial buildings, and buildings which have been improved since 22 May 2025 (e.g. major capital improvements, including seismic strengthening).

To put this into context, if a company purchases an asset with a cost of $100,000, it will receive an Investment Boost tax deduction of $20,000 on day one. At a 28% company tax rate, this is equivalent to paying $5,600 (or 5.6%) less tax. In year one, the company also starts claiming depreciation on the ‘net of Investment Boost’ cost of the asset. Assuming a 10% depreciation rate and the asset was owned for the whole year, the business could claim $8,000 of depreciation, bringing total deductions in year one to $28,000 (as compared to the $10,000 that could be claimed without Investment Boost).

What does ‘available for use’ mean?

Because Investment Boost applies to new assets which become available for use from 22 May 2025, it is important for taxpayers who were in the process of acquiring or constructing assets to understand when something is considered ‘available for use’. This is a concept which has been part of the depreciation rules for a long time and generally is well understood by taxpayers (although often not much turns on it). Given Investment Boost won’t apply to assets available for use prior to 22 May 2025, taxpayers who were on the cusp of completing assets at the time of the announcement, or who had purchased an asset that wasn’t capable of being used before 22 May 2025, should carefully consider this test prior and think about whether getting certainty from Inland Revenue (e.g. in the form of a binding ruling or indicative view) would be worthwhile. Consideration should also be given to guidance issued earlier this year on how to identify what an asset is, as this may influence the outcome for assets that were under construction. 

When is something new?

Investment Boost applies to ‘new’ assets. A new asset is something which first becomes available for use in New Zealand on or after 22 May 2025. 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). 

What are the value and business size limits?

Unlike similar regimes in other countries, there are no rules restricting this to smaller businesses or putting an upper cap on the asset value. Provided the investment is in new investment assets, the 20% deduction will be available. The broad application of Investment Boost means that the rules are simple to understand and apply, as there are no complicated boundaries and definitions to navigate.

Is it compulsory to claim the deduction?

No, this is an optional deduction. It does not need to be claimed by a taxpayer. For example, a taxpayer who has tax losses might choose not to claim the deductions if they thought they were at risk of losing shareholder continuity and not satisfying the business continuity test.

Does it have to apply to all assets?

The Investment Boost deduction applies to new investment assets on an asset-by-asset basis, there is no requirement to be consistent across all assets. For example, if claiming the additional deduction requires manual calculations, a taxpayer might choose to just apply it to big ticket items and depreciate all smaller assets under existing rules.  

Is Investment Boost a depreciation deduction?

For all intents and purposes the deduction should be thought of as depreciation. The depreciation rules have been amended to ensure that Investment Boost deductions are included within depreciation recovery calculations.

How do the rules apply to agriculture?

Certain industries have their own special tax rules, including farming, horticulture, aquaculture and forestry. These special rules set out when and how tax deductions apply, and apply an amortisation approach rather than depreciation for certain types of expenditure. Investment Boost is intended to apply to improvements to farmland, forestry land, and aquacultural businesses and planting of listed horticultural plants where the cost is incurred on or after 22 May 2025. This will require an apportionment of costs in the first year of application.

Does it apply to buildings?

Yes, buildings are depreciable property so a new building will be eligible, provided it is not a “dwelling”. A dwelling is generally a place that is used predominantly as a residence or abode, but specifically excludes hospitals, hotels and motels (and similar), nursing homes and rest homes (and similar).

If an improvement is made to a new investment asset, that also qualifies. So, if there are modifications being made or capital improvements like seismic strengthening to an existing building this will be eligible. Given the depreciation rate for buildings is set at 0%, this could represent more than just a timing difference as the cost of capital improvements is currently blackhole expenditure. Depreciation recovery rules apply as normal, so it is possible the deduction could be clawed back if the building is sold above book value in the future.

Can Investment Boost be included in Research and Development Tax Incentive (RDTI) calculations?

If an asset is being used in eligible R&D, then the Investment Boost deduction is also able to be incorporated as an additional expense when calculating the RDTI entitlement. The Investment Boost deduction should be treated as a depreciation deduction in these calculations.

How does Investment Boost interact with the low value asset rule and depreciation pooling rules?

Taxpayers are able to take an immediate deduction for assets costing $1,000 or less. We have confirmed with Officials that this threshold remains in place based on the full cost of the asset. That is, if you buy an asset costing $1,250, you don’t claim $250 as an Investment Boost deduction, bringing the book value to $1,000, and then claim the remaining $1,000 as a low value asset.

For taxpayers who use depreciation pools, you are entitled to add assets into a pool which have a book value of $5,000 or less. In this case, Officials have advised they are comfortable that if an asset is acquired costing $6,000 and $1,200 is claimed as an Investment Boost deduction, the asset can be put straight into a depreciation pool as its book value will be less than $5,000.

What is Fixed Life Intangible Property (FLIP)?

Investment Boost does not apply to FLIP. This is because Officials were concerned that intangible assets are easier to manipulate and can be used to shift profits internationally. Examples of FLIP include patents, copyright licences and plant variety rights. In some cases, software will be FLIP.

FLIP is intangible property which has a legal life that is reasonably expected to be the same length as the property’s remaining estimated useful life.

Software may be FLIP in some circumstances, and Inland Revenue has issued previous guidance about Software as a Service (SaaS) which states that if a SaaS arrangement has a fixed term it may be FLIP. The Inland Revenue guidance states:

“The Commissioner considers the right to use software has an estimated useful life of 4 years. Accordingly, where the legal life of the SaaS arrangement is longer than 4 years, the SaaS arrangement will not be FLIP and the taxpayer must calculate their depreciation loss under the general provisions on depreciable intangible property that is discussed at [186]. However, where the legal life of the SaaS arrangement is shorter than 4 years, the estimated useful life of the right to use software will align with the legal life. It follows that in these situations the SaaS arrangement will be FLIP.”

Inland Revenue expect this guidance to be adhered to when determining whether software expenditure is eligible. 

What about mixed use assets?

Where an asset has both business and private uses, it will be necessary to apportion the Investment Boost deduction between the business and private uses. There is a rule which will require adjustments to be made if there is a 25%+ change in the way an asset is used.

What will I put in my tax return?

A common practical question is whether Investment Boost deductions will need to be separately disclosed in tax returns. Which disclosures will be required will be relevant to taxpayers who are seeking to determine what systems changes are required to ensure deductions can be identified and claimed efficiently.

It is not clear at this stage whether it will be a requirement. It is not necessary for a business to make a formal election into the regime, instead the legislation states that Investment Boost applies when “the person has chosen to apply [the rules] to the asset in a return of income for the income year”; that is, you elect in simply by claiming the deduction. Officials have advised in the Regulatory Impact Assessment accompanying the Investment Boost legislation that they will be wanting to monitor compliance with the rules; therefore, we recommend that businesses to seek to ensure systems will be able to identify the Investment Boost deductions being claimed. If for no other reason, the Government (and future Governments) will likely want to ensure there is evidence of the positive impact of the initiative to justify its longevity.

How do we account for this?

Deferred tax issues can arise when there is a difference between the tax and accounting treatment of assets. This is something that building owners will be familiar with as a consequence of changes to how buildings have been depreciated.

Taxpayers should start to consider what the deferred tax impacts will be, and possibly discuss this upfront with auditors if the issue is material.

Can off the shelf depreciation fixed asset registers do these calculations already?

It is necessary that a business retains a record of the original (full) cost of an asset so that depreciation can be calculated correctly when assets are disposed of; a business ideally shouldn’t be loading just the net 80% cost amount into the tax fixed asset register.

It’s likely that existing depreciation systems have some capability to undertake the calculations required for Investment Boost because similar expensing regimes have been in place in other jurisdictions, such as the United States.  However, it will be necessary for taxpayers to work with software providers to determine whether the functionality exists and how to access it.  

When do these rules end?

There is no legislated end date. Budget fund initiatives in four-year cycles, so under the current Government, the expectation is that this will remain in place for the foreseeable future. However, a future Government may have alternative priorities. As businesses crave stable rules, hopefully Investment Boost will be here permanently.

Get in touch

Please get in touch with your usual Deloitte advisor for further information about Investment Boost and how it works. There are professionals across all areas of Deloitte who are available to assist with understanding how to take advantage of Investment Boost.