The Government has passed legislation to allow a one off 20% deduction on new investment assets purchased on or after 22 May 2025.
Qualifying assets include machinery, equipment and work vehicles along with new commercial and industrial buildings. It does not include trading stock, land, residential dwellings or assets that have previously been used in New Zealand.
Expenditure must have been incurred on or after 22 May 2025. Assets purchased before this date will not qualify.
Assets include various improvements to farmland, planting of listed horticultural plants, improvements to aquacultural businesses and improvements to forestry land.
You can apply the usual depreciation rate to the cost value, less the 20% deduction. Please note in the year of purchase, depreciation is claimed from the date of purchase to balance date.
An example for the purchase of a business asset:
You buy a qualifying machine for $100,000 (with no government funding or contributions) in April 2026.
You can claim a $20,000 tax deduction in that income year.
You can then depreciate the remaining $80,000 using standard rates.
If the applicable depreciation rate is 13%, your depreciation claim would be:
$80,000 × 13% = $10,400
So in total, you'd claim:
- $20,000 as a new investment asset deduction, and
- $10,400 as depreciation
That’s a total of $30,400 in deductions in the first year.
If you did receive a contribution or government grant, that amount comes off before calculating the depreciation claims.
If using the standard method to calculate provisional tax, a large deduction under the new rule could result in overpaying tax for the year. In this case, consider using the estimate method to avoid tying up cash unnecessarily.
If you’d like help understanding how this change might impact your business or future investment decisions, feel free to get in touch. We’re keeping a close eye on developments and will provide updates as the legislation moves forward.