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How the Government’s new tax incentives could help accelerate business growth and improve the economics of your next capital project.
The New Zealand Government's new Investment Boost tax incentive has created a significant opportunity for businesses considering a new commercial building, warehouse expansion, industrial development,manufacturing facility, or major capital improvement project. From 22 May 2025,eligible businesses can claim an immediate 20% tax deduction on qualifying capital assets, while still claiming depreciation deductions on the remaining balance where applicable.
For businesses planning growth, this policy effectively reduces the after-tax cost of investing and improves short-term cashflow—making projects that may have previously been delayed or difficult to justify financially much more attractive.
Investment Boost is a new tax incentive introduced as part of Budget 2025 to encourage businesses to invest in productive assets and infrastructure. Businesses can immediately deduct 20% of the cost of eligible new assets in the year they are first available for use, then continue to claim normal depreciation deductions on the remaining value where depreciation applies.
Importantly for the commercial property sector, the policy applies not only to machinery and equipment but also to new commercial and industrial buildings, even though these buildings currently have a 0% depreciation rate for tax purposes.
This means that many businesses constructing their own premises, expanding operations, or developing industrial facilities may be eligible for a substantial upfront tax benefit.
Potential qualifying investments include:
The asset must generally be:
The policy specifically excludes:
Because eligibility can depend on ownership structure, timing and asset type, businesses should seek advice from their accountant or tax adviser before proceeding.
Let's consider a simple example.
A business invests $2 million in a new industrial building.
Under Investment Boost, the business may be able to claim an immediate deduction of $400,000 (20%) in the year the building becomes available for use.
At the current company tax rate of 28%, that deduction could equate to approximately $112,000 in reduced tax liability, improving cashflow and effectively lowering the project's after-tax cost.
While every business's circumstances differ, the principle is clear: the Government is bringing forward tax deductions that would otherwise be unavailable or spread over a much longer timeframe.
One of the most significant advantages of Investment Boost is its impact on return on investment.
Commercial construction projects are often evaluated based on:
An upfront tax deduction improves the early-year cashflow profile of a project, which can have a meaningful impact on investment metrics.
For owner-occupiers, this can help justify a new facility sooner.
For investors and developers, it can improve the economics of development and expansion projects.
For growing businesses, it can free up capital to reinvest into additional staff, equipment, technology, inventory, or future expansion.
The biggest benefit may not be the tax saving itself—it is what the tax saving enables.
Many New Zealand businesses delay expansion because of the initial capital outlay required. Investment Boost lowers the effective entry cost of growth projects and improves short-term affordability.
Businesses considering expansion may now be able to:
In many cases, bringing forward a growth project by one or two years can generate productivity gains that far outweigh the value of the tax deduction itself.
While Investment Boost is a positive development for most businesses, it is important to understand its limitations.
For many depreciable assets, the policy accelerates deductions rather than creating entirely new deductions. Businesses receive tax benefits sooner, but future depreciation deductions are reduced accordingly.
The incentive improves project economics, but businesses still need sufficient capital or lending capacity to undertake the investment.
Certain asset classes, particularly residential property and land purchases, are excluded.
Asset ownership structures, construction timing and tax positions can affect eligibility and outcomes.
Unlike some temporary investment stimulus measures used overseas, Investment Boost currently applies to eligible assets that become available for use on or after 22 May 2025. Government guidance indicates the measure is intended as an ongoing incentive, and no formal sunset date has been announced at this time.
However, tax policy can change with future Governments and Budgets, so businesses considering large capital investments may wish to factor current settings into their planning.
For businesses already considering growth, Investment Boost may provide the additional incentive needed to move forward.
Whether you're planning a new warehouse, commercial office, industrial facility, transport hub, or major expansion project, the ability to claim an immediate 20% deduction can improve cashflow, strengthen project returns and make expansion more financially achievable.
At Homestead, we're already seeing increased interest from businesses evaluating how these new tax settings can support long-term growth plans. When combined with a well-designed facility that improves operational efficiency and supports future expansion, the benefits can extend far beyond the initial tax saving.
If you're considering a commercial or industrial construction project, our team can help you assess the opportunities, costs and practical considerations involved in bringing your investment plans to life.
Disclaimer: This article is general information only and should not be relied upon as tax advice. Businesses should seek advice from a qualified accountant or tax adviser regarding their specific circumstances and eligibility.
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