Budget 2025: A New Era of Business-Friendly Tax Policy in New Zealand

The New Zealand Government has unveiled a sweeping new tax incentive policy titled Investment Boost as part of Budget 2025, aiming to accelerate business investment, increase productivity, and lift the national economy. Announced by Finance Minister Nicola Willis, this bold move is expected to generate far-reaching benefits across sectors and scale.

Encouraging Capital Investment for Economic Resurgence

According to Minister Willis, economic growth remains at the heart of improving living standards, generating better-paid jobs, and funding essential public services. Central to achieving this is incentivizing private sector investment in productive assets.

Under the new scheme, businesses will be able to immediately deduct 20% of the cost of new assets, in addition to claiming regular depreciation. This translates into lower tax bills in the year of purchase, helping to ease cash flow constraints and enhance the viability of growth-oriented investments.

“This initiative is about making investment more attractive today so that businesses can grow and create high-wage jobs tomorrow,” Minister Willis emphasized.

Scope and Impact: What’s Covered

Investment Boost is available from today, encompassing a wide array of tangible assets. These include:

• Machinery

• Tools and equipment

• Vehicles

• Technology and computing systems

• Commercial buildings

Notably, land, residential buildings, and assets already in use within New Zealand are excluded. Importantly, the incentive applies to both new assets purchased domestically and new or used assets imported from overseas.

Crucially, there is no upper limit on investment value, ensuring that businesses of all sizes—from sole traders to major corporations—stand to benefit equally from this stimulus.

Economic Forecast: Big Gains Over Two Decades

Joint analysis by The Treasury and Inland Revenue anticipates that the policy could lead to:

• 1% lift in GDP

• 1.5% increase in wages

• 1.6% rise in national capital stock

Half of these gains are expected to materialize within the first five years, providing a timely boost as New Zealand emerges from a period marked by global volatility and domestic challenges.

Real-World Benefits: Lower Tax, Higher Investment

To illustrate the impact, an advanced manufacturing company investing $200,000 in a new environmental test chamber would see a tax saving of over $10,000 in the year of acquisition. This improved cash flow encourages more firms to greenlight expansion and modernization plans that might otherwise be delayed or abandoned.

Minister Willis argued that Investment Boost offers more value than a general corporate tax cut, because it only applies to new investments and doesn’t reward past activity. “This ensures that every dollar of taxpayer support stimulates new economic activity,” she explained.

Cost and Commitment

The initiative is forecast to cost the government $1.7 billion annually in foregone tax revenue over the forecast period. However, the policy is viewed as a strategic investment in long-term economic dynamism rather than a mere tax concession.

Rebuilding with Confidence and Control

In her statement, Minister Willis underlined the context in which this policy is introduced: improving economic conditions driven by declining inflation, easing interest rates, fiscal restraint, and pro-growth government policies.

“Our government is committed to rebuilding confidence in the business sector,” she said. “We understand the tough environment businesses have faced—Investment Boost is our way of saying we believe in your potential to drive prosperity.”

A Forward-Looking Fiscal Strategy

Budget 2025’s Investment Boost is a signal of New Zealand’s renewed economic ambition. By empowering businesses to invest boldly in their future, the policy is expected to create a virtuous cycle of growth, innovation, employment, and higher incomes.

With no cap on eligible investments and wide applicability across sectors, Investment Boost could become a cornerstone of New Zealand’s post-crisis economic resurgence, promoting not just recovery—but transformation.