Investment Boost 20% Deduction Explained NZ

This calculator explains how New Zealand's Investment Boost works and shows the first-year deduction and tax saving it delivers when your business buys a new asset. Investment Boost was introduced to encourage businesses to invest, and it does so by letting you deduct twenty percent of the cost of a new eligible asset immediately in the year you first use it, on top of the normal depreciation you would claim on the remaining eighty percent. In other words, instead of writing the asset off slowly over many years, you get a big chunk of the deduction straight away, which cuts your taxable profit and your tax bill in the year you invest. Eligible assets are generally new depreciable business assets such as machinery, equipment and commercial vehicles, while land, residential buildings and second-hand assets are typically excluded. You enter the asset cost, its normal depreciation rate, and your company or marginal tax rate, and the calculator shows the immediate twenty percent deduction, the first-year depreciation on the rest, the total first-year deduction and the tax it saves. Remember this is mainly a timing benefit that improves cash flow when you invest, not a permanent extra deduction, since the remaining cost is depreciated as usual over time. Eligibility and rules can change, so confirm the current detail with IRD or your accountant. General information, not tax advice.

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$3,920
first-year tax saved
Immediate 20% deduction$10,000
First-year depreciation$4,000
Total year-1 deduction$14,000

A timing benefit: the remaining 80% is depreciated as usual over later years. Eligibility excludes land and residential buildings. Confirm current rules with IRD. General information only.

How it works

The immediate deduction is 20 percent of the asset cost. The remaining 80 percent is depreciated at the asset's normal rate, giving the first-year depreciation. The total year-one deduction is the immediate 20 percent plus that depreciation, and the tax saved is the total deduction times your tax rate.

Worked example

On a 50,000 dollar asset, the immediate 20 percent deduction is 10,000 dollars. Depreciating the remaining 40,000 at 10 percent adds 4,000 dollars, for a 14,000 dollar first-year deduction. At a 28 percent company rate, that saves about 3,920 dollars of tax in year one.

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Frequently asked questions

What is Investment Boost?

Investment Boost lets a business deduct 20 percent of the cost of a new eligible asset immediately, in the year it is first used, on top of normal depreciation on the remaining 80 percent. It was introduced to encourage business investment.

What assets qualify?

Generally new depreciable business assets first used on or after the start date, such as machinery, equipment and commercial vehicles. Land, residential buildings and previously-used assets are typically excluded. Check current eligibility with IRD or your accountant.

How does it save tax?

Bringing forward 20 percent of the cost as an immediate deduction reduces taxable profit in year one, so you pay less tax that year. It is a timing benefit that improves cash flow when you invest, rather than a permanent extra deduction.