An IT Leader's Take on the Investment Boost

For New Zealand business leaders, driving growth means making smart investments. The Government's new Investment Boost is a game-changer for businesses looking to acquire new productive assets. It's a clear financial incentive designed to help your firm innovate, expand, and grow faster. This article is my interpretation* on what this means for tech spend, helping you understand how it can support your firm's innovation and growth.

Want to know how much you could save? Use our calculator.

The Investment Boost: An Advantage for Tech Acquisition

Simply put, the Investment Boost allows businesses to get a quicker tax deduction for new capital assets. When you buy eligible new technology - like servers, machinery, or even a new commercial building to house infrastructure - you can claim a bigger portion of its cost as a tax deduction in the year of purchase.

This front-loaded deduction reduces your taxable income sooner, putting more cash back into your business. The goal? To encourage new investment and fuel economic growth.

Key Timing: When Does the Boost Apply?

It's important to clarify the effective date for the Investment Boost. This deduction applies to any eligible asset that becomes available for use after 22 May 2025. This isn't just about when you spent the money, but when the asset is ready for operation.

This distinction is particularly good news for the tech sector. For businesses undertaking longer projects, such as developing a complex custom software system, you might have already invested significant funds before 22 May. As long as that system becomes completed and available for use after 22 May 2025, those capitalised development costs will still be eligible for the 20% Investment Boost deduction once the asset is ready. This ensures you benefit even if your project timelines span across the announcement date.

What Technology Investments are Covered?

The boost applies to most new assets depreciable for tax purposes. This includes a wide array of technology crucial for a growing business:

• Hardware (Servers, Network, Equipment): This covers everything from new servers, network infrastructure, and high-performance computing equipment to advanced manufacturing robotics and essential office hardware.
• Software (Capitalised): While not all software is capitalised, if a new software solution (or its implementation) is treated as a capital asset for tax purposes, it can be eligible. This often applies to large-scale enterprise resource planning (ERP) systems, customer relationship management (CRM) platforms, or other substantial, long-term software acquisitions.
• Capital Spend on Project Delivery: Where expenditure on a project leads to the creation of a new capital asset, that capitalised project spend can be eligible for the Investment Boost. This could include, for example, the capitalised costs associated with developing and deploying a new integrated manufacturing control system, or the costs of setting up and installing a new data centre, provided these expenditures result in a new depreciable asset.

There are no limits on the number of eligible assets or their value. If an asset is used partly for business and partly for private purposes, the boost applies to the business-use portion.

What Technology Investments are Likely Not Covered by the Investment Boost?

Even with the new boost, some technology-related expenditures generally won't qualify. Here's a breakdown:

• Second-hand Tech from within NZ: If you're looking at buying used servers, laptops, or other equipment that has already been used in New Zealand, it won't be eligible for the Investment Boost. The incentive is specifically for new assets, or those "new to New Zealand" (i.e., imported used assets that haven't been used here before). This is a key point if you’re considering cost-saving through second-hand local purchases.
• Routine Software Licenses & Subscriptions (Operating Expenses): Many common software costs are treated as operational expenses (fully expensed in the year they are incurred) rather than capital assets. This includes things like: Monthly or annual Software-as-a-Service (SaaS) subscriptions (e.g., Microsoft 365, Xero, standard CRM subscriptions where you don't own the underlying software). Off-the-shelf software purchases that are not capitalised for tax purposes (e.g., a single-user licence for a small utility program, or a one-off purchase of standard design software that isn't a significant, long-term asset for the business). Many cloud-based services fall into this category. The Investment Boost primarily targets capital expenditure.
• Intangible Assets with a "Fixed Life" (like Patents, Copyrights related to tech): While some large, custom-developed software might be capitalised, fixed-life intangible assets like acquired patents for a new technology, specific software copyrights, or certain licences with a definite, short legal life are generally excluded. The rules around "Fixed Life Intangible Property" (FLIP) are complex, but the general idea is to exclude easily manipulable intangible assets. This doesn't typically apply to the acquisition of standard, capitalised ERP or CRM systems, which are more about the software asset itself.
• Low-Value Assets Already Fully Expensed: New Zealand tax rules allow for an immediate deduction for assets costing less than $1,000 (ex-GST). If a technology item falls under this threshold (e.g., a new mouse, keyboard, or a small network switch), it's already fully deductible in the year of purchase under existing rules, so the Investment Boost wouldn't apply, nor is it needed.
• Technology Developed for Sale (Trading Stock): If your  firm develops software or hardware as a product to sell to customers, that technology is considered "trading stock" (inventory). It's not an asset for the business's internal use that would be depreciated, and therefore not eligible for the Investment Boost.
• Personal Use Portion of Technology Assets: While the business-use portion of a technology asset may be eligible, any part of its cost attributable to private or non-business use would be excluded.

Real Financial Impact: A $50,000 Tech Example

Let's say you invest $50,000 in a new, critical piece of technology, like a high-performance server or a key manufacturing automation system.

With the Investment Boost:

• Immediate 20% Deduction (Year 1): You get an upfront deduction of $10,000 ($50,000 × 20%).
• Standard Depreciation (Year 1, on reduced base): Your normal depreciation (e.g., 15%) is then calculated on the remaining $40,000 ($50,000 - $10,000), which is $6,000.
• Total First-Year Deduction: This adds up to $16,000.

Given New Zealand's 28% company tax rate, this $16,000 deduction means your company's tax bill is reduced by $4,480 ($16,000 × 28%). This $4,480 stays in your business, providing immediate cash flow that can be reinvested into further technology advancements.

Maximising Your Tech Spend

The Investment Boost provides a clear financial incentive to make those strategic technology purchases now. For businesses focused on growth, this can be a valuable tool to enhance capabilities and ensure your systems and hardware investments are optimised for your future success.

Want to know how much you could save? Use our calculator.

*Disclaimer: This information is for general guidance only and does not constitute financial or tax advice. For specific advice tailored to your business, please consult with a qualified financial or tax professional. Information is current as of May 2025. For the most up-to-date details, refer to the Inland Revenue website.