From David Hooper, David Hooper CA Ltd
The boost is really only a timing difference for tax: when the asset is eventually sold, any “over-claim” of depreciation may be written back as depreciation recovered and taxed as income.
From 22 May 2025, NZ businesses can claim an extra 20% deduction in year one when they buy a new depreciable asset (often called the “Investment Boost”). You still depreciate the remaining 80% at the normal IRD rate. It’s not free money - it simply brings forward a slice of future deductions to help cash flow now, with a potential clawback later if you sell above book value.
What qualifies (in plain English): New business assets like machinery, tools, equipment, and many fit outs. Not second-hand purchases. Commercial buildings can qualify for the 20% upfront deduction even though they don’t usually depreciate.
Buy a new machine for $100,000. In year one you can deduct $20,000 immediately. The remaining $80,000 is depreciated as usual over time. At a 28% tax rate, that upfront 20% could trim this year’s tax by $5,600 - but remember, if you later sell above its book value, some or all of that benefit may be taxed back as depreciation recovery.
Keep invoices and an asset register; confirm the asset is new and used for business; factor the bigger year‑one deduction into provisional tax planning; and before signing, check the sale and purchase terms (including any chattels values) so tax treatment matches reality.
This is general advice only so always consult a Chartered Accountant to get advice on your situation.
