Finance 
The New Zealand Government's Investment Boost is one of the more significant tax changes for business owners in recent years. If your business is planning to purchase a vehicle, machine, or piece of equipment, understanding how it works — and what it means for your tax position — is worth doing before you commit to a purchase.
Note: depreciation rates referenced in this post are based on IRD published rates. Your accountant should confirm what applies to your specific asset and business structure.
What the Investment Boost Is
The Investment Boost allows businesses to immediately deduct 20% of the cost of a new eligible depreciable asset in the year of purchase — on top of normal depreciation. It's designed to bring forward the tax benefit of business investment, making it more attractive to acquire productive assets now rather than later.
The remaining 80% of the asset's cost is then depreciated at the normal IRD rate over subsequent years.
For a business with a 31 March balance date, an asset purchased and in use before 31 March qualifies for the Investment Boost deduction in that financial year. For more on how balance date timing affects the decision, see our post on buying equipment before balance date.
How Depreciation Works Normally
Before getting to the Boost, it helps to understand the baseline.
IRD assigns depreciation rates to different asset classes based on their expected useful life. Most business assets use the diminishing value (DV) method — a fixed percentage applied to the asset's remaining book value each year. Alternatively, the straight line (SL) method deducts a fixed dollar amount annually until the asset reaches zero book value.
For common business assets, published DV rates include:
- Motor vehicles (cars, utes, vans): 30% DV
- Trucks (light commercial): varies by type — check IRD's published schedule
- Earthmoving and excavation equipment: varies by category
- Forklifts: varies by type
These are indicative — IRD's asset depreciation rate finder confirms the exact rate for each asset category and type.
What This Looks Like in Practice
Here's a hypothetical example showing how the Investment Boost works for a business purchasing a new ute before 31 March.
Scenario: A plumbing business purchases a new ute for $75,000 (excl. GST) in March. The business is eligible for the Investment Boost.
| Deduction | Calculation | Amount |
|---|---|---|
| Investment Boost (20% of cost) | 20% × $75,000 | $15,000 |
| Remaining book value after Boost | $75,000 − $15,000 | $60,000 |
| Year 1 depreciation at 30% DV | 30% × $60,000 | $18,000 |
| Total Year 1 deduction | $33,000 |
In Year 1 alone, the business deducts $33,000 against taxable income. At a 28% company tax rate, that represents approximately $9,240 of tax that isn't payable this year — cash that stays in the business.
From Year 2, the Investment Boost is already taken. Depreciation continues at the standard 30% DV rate on the remaining book value of $42,000.
This is a simplified hypothetical. Your accountant will determine the exact rates and amounts for your specific asset and situation.
The Finance Angle
This is where it gets particularly interesting. If the business financed the ute rather than paying $75,000 cash:
- The full depreciation deductions still apply — you own the asset
- The $75,000 cash stays in the business earning a return
- The interest expense on the finance is also deductible
- Working capital remains available for wages, materials, and opportunities
The Investment Boost makes the asset more tax-efficient to own. Financing it makes the acquisition more cash flow-efficient. The two work together, not against each other.
Our capital reinvestment calculator lets you model what keeping that capital working could mean for your business. For the broader accounting framework behind Capex decisions, see our post on Opex vs Capex and our post on cashflow vs profit.
What to Do Before Balance Date
If you're considering a significant asset purchase and your balance date is 31 March:
- Confirm eligibility — talk to your accountant about whether the specific asset qualifies for the Investment Boost
- Model the numbers — understand what the deduction looks like against your current year taxable income
- Sort finance early — Finance Worx can arrange approval quickly, but leaving it to the last week of March creates risk
Find out more about business and commercial finance. Apply now or contact us to talk through financing a business asset.