Scrapping Investment Boost funds real relief for 35,000 tiny businesses

Two different bets on what small business needs

Labour has unveiled a small business package costing $1.56 billion over four years, paid for by redirecting money out of National’s Investment Boost scheme. The pitch is cashflow relief for the little guy, and it has three planks.

The GST registration threshold would rise from $60,000 to $80,000 from July 2028, removing about 35,000 businesses from the GST net. The instant asset write-off threshold would jump from $1,000 to $10,000 for firms turning over under $10 million, from July 2027. And large businesses would be required to pay small suppliers within one day for invoices up to $25,000, with payment performance published.

Labour small business spokesperson Dan Rosewarne framed it plainly: “If you’re a tradie waiting months for a corporate to pay an invoice, a cafe owner replacing an oven, or a mechanic upgrading equipment, these changes are about giving you a fair go.”

What gets axed to pay for it

Investment Boost, introduced in Budget 2025 and effective for spending on or after 22 May 2025, lets businesses immediately expense a chunk of new capital investment. It is deliberately broad, with no turnover cap, no asset value cap and no sector restrictions.

That breadth carries a price. IRD’s regulatory impact statement put the annual cost at roughly $1.7 billion, and Treasury modelled long-run gains of 1% to GDP, 1.5% to wages and 1.6% to the capital stock over 20 years, with about half arriving in the first five. The gross four-year cost is around $6.6 billion, partly offset by an estimated $2.6 billion in extra tax revenue from the growth it generates.

BusinessNZ has come out swinging, calling Investment Boost “one of the most important productivity policies New Zealand has introduced in years” and warning that narrowing it to SMEs would strip billions from investment by larger employers, exporters and manufacturers. It points to IRD survey data showing 40% of firms that bought new assets say the scheme lifted their investment, and nearly half of those planning to invest over five years say it is shaping those plans.

The rebuttal Labour is leaning on

There is a decent counter. David Downs, chair of a small business advisory group, argues that small businesses simply lack the cash to use Investment Boost in the first place. A depreciation sweetener is worthless if you can’t fund the purchase. A firm drowning in late payments and thin margins doesn’t need a better write-off, it needs to get paid.

Labour’s other line, that the scheme skews to big firms and multinationals, also has a factual basis. A Newsroom analysis noted New Zealand’s version is unusually permissive by global standards, with no asset value cap, so a multi-billion-dollar offshore wind farm qualifies, alongside petroleum, mining, company cars and commercial property. Australia limits partial expensing to SMEs. The UK caps asset value at £1 million and restricts eligibility to machinery. New Zealand did none of that.

The trade-off nobody should gloss over

Strip out the politics and the choice is stark. National is spending $6.6 billion on a broad productivity stimulus with modelled GDP, wage and capital gains. Labour would spend $1.56 billion on targeted relief for the smallest firms. There is no equivalent Treasury modelling showing Labour’s package lifts GDP, wages or the capital stock, because it is built for relief, not growth.

That is a legitimate call. Faster payment rules genuinely help firms that big corporates treat as free credit, and lifting the GST threshold cuts real compliance friction for micro-businesses. But it is a substitution, not a free lunch, and the macro upside is what’s being handed back.

The timing invites a raised eyebrow too. The announcement landed days after Prime Minister Christopher Luxon’s “be adult” lecture to business owners forced a rare Beehive apology, and it’s fair to suspect the release was accelerated to exploit that stumble.

With the write-off change not landing until July 2027 and the GST lift until July 2028, none of this is imminent. But it sets up a clean election-year contest. National is betting on capital deepening across the whole economy. Labour is betting the smallest firms need cash in the till today more than they need a depreciation incentive they can’t afford to trigger. Business owners get to decide which bet fits their books.

Sources

• 1News: Labour unveils small business package promising faster repayments, tax relief (2026-08-06)
• RNZ: Labour to slim down Investment Boost policy, targeting it to small businesses (2026-08-06)
• Scoop: Small Business Relief Welcome – But Tax And Threshold Neglect Is The Real Story (2026-08-06)
• NZ Herald: Small businesses don’t have the cash for Investment Boost – David Downs (2026-08-06)
• Newsroom: Labour zeroes in on small business relief, not big business stimulus (2026-08-06)
• Newsroom: Investment Boost – Govt’s ticking fiscal time bomb (2025-05-24)
• IRD: Partial expensing (Investment Boost) regulatory impact statement (2025-05-22)