New Zealand’s Budget 2025 has introduced the “Investment Boost” tax incentive, allowing small businesses to immediately deduct 20% of eligible asset costs from taxable income.
The incentive is revealed in Thursday’s Budget 2025, the policy allows businesses to immediately deduct 20% of the cost of eligible assets, such as machinery, tools, and technology, from their taxable income.
Policy to Support Productivity and Sector Growth
The initiative targets productivity-enhancing investments and is expected to particularly benefit tradespeople, farmers, and small enterprises. According to the Government, the measure is intended to lift productivity, increase wages, and encourage broader business investment.
One small business that would have benefited significantly from the new scheme is Norsewear, a woollen sock company in Hawke’s Bay. Owner Tim Deane invested $140,000 in two Italian Lonati knitting machines last year. Had he been able to claim the new deduction, he would have received an immediate tax saving of $28,000, in addition to 13% depreciation.
“It enables me to invest more, more often, which means I can improve productivity and increase output and that often goes hand in hand with employing more people as well,” says Deane. He adds, “We are being encouraged to grow the productive economy, to create more jobs and more tax revenue and it will generate more products we can export.”
Industry Representatives React with Measured Optimism
The policy has been met with cautious optimism from business leaders. Brad Jacobs, director of The Coffee Club and chair of the Parnell Business Association, describes it as practical and encouraging:
“It is good news for our The Coffee Club franchisees. It will encourage people to invest in their businesses and this goes back into the economy. It’s not revolutionary but it’s going to help.”
Jacobs notes a shift in sentiment compared to a year ago, saying: “Twelve months ago it felt like everyone was standing on the edge of the cliff joining hands and getting ready to jump and now they are ready to be positive.” He also welcomed the Budget’s announcement of a $480 million boost to police funding over four years.
“As chair of the Parnell Business Association, the announcement on putting over half a billion on crime over the next four years is good news. They have been making good progress on policing crime but there are still legitimate safety concerns in the Auckland city fringe like Parnell and we’re still struggling with it.”
Technology Leaders Emphasise Alignment with Capability Goals
Tech companies also saw opportunity in the Budget. Todd Hammington, CEO of Chameleon Creator, a platform that helps organisations modernise employee training, noted the Government’s emphasis on capability building.
“What we took from this Budget is that the Government wants companies to invest in their people, and that’s exactly what our tool helps them do,” Hammington says. “With large investment going into public sector areas like tertiary education, healthcare, and social services, those sectors will need better tools to on-board and grow their teams.”
Construction and Housing Sectors Eye Infrastructure Opportunities
The increased spending on public services is seen as a positive signal in the construction and interior sectors. Tom O’Sullivan of T & R Interior Systems says: “If you look at what the Government has pledged to spend on health, education, law and order and defence, I’m sure quite a big percentage will be on infrastructure and buildings, and that’s definitely a positive for us and will help drive confidence.”
James Bushell of Toa Homes agrees, though he calls for longer-term thinking: “It is fantastic we are seeing more money going into healthcare in this Budget but there’s still a bandaid approach. We need to start looking more at preventative care and better housing stock is one of the best ways of achieve this so we are the fence at the top of the cliff rather than the ambulance at the bottom.”
Consumer sentiment will be the key test of Budget 2025’s success in the wine sector, according to Brent Linn, CEO of Hawke’s Bay Wine. “It’s not about the industry’s reaction to the Budget that’s important but Mr and Mrs NZ — what’s their confidence like as a consequence of the Budget.” He notes that lower interest rates could bring consumers back into the market. The Investment Boost is being welcomed as a step toward improving small business confidence.