Investment Boost should improve business confidence
The Investment Boost will allow New Zealand businesses to elect to take a 20% upfront deduction for new capital assets bought for their business. These assets must be used or available for use for the first time on or after May 22, 2025.
Businesses already committed to building new assets before this date may still be eligible, provided the asset meets the usage criteria.
The Investment Boost will apply to the purchase of most assets that are depreciable for tax purposes such as machinery, equipment and vehicles.
It will also apply to new commercial and industrial buildings even though normal depreciation for these assets is 0%.
In addition, improvements to depreciable property will be eligible for the Investment Boost if the asset being improved is also eligible.
An example of an eligible improvement would be significant strengthening of an industrial building used or available for use on or after May 22, 2025.
Assets that will be excluded from the Investment Boost are assets that have previously been used in New Zealand, including land, trading stock, residential buildings (dwellings), fixed life intangible assets (such as patents and trademarks), and assets that are fully expensed under other rules (such as assets that cost less than $1000 that are fully deductible).
For businesses currently claiming Research and Development tax credits, the good news is that the deduction will be an eligible expenditure.
While opponents might see the Investment Boost as a tax break for businesses, we see this as a positive incentive for businesses to invest in productive assets to boost the economy.
If the asset is a depreciable asset, then the taxpayer would have been able to depreciate the asset anyway.
Introduction of the Investment Boost will simply allow the deduction to be brought forward while still allowing for the amount to be clawed back in the same way depreciation is if the asset is sold.
While the devil will be in the details, we believe this is a positive move for businesses in New Zealand looking to retain funds and invest in their future, which is ultimately what NZ Inc needs.
While the early deduction will benefit those taxpayers already committed to expenditure, the hope is that the Investment Boost will also give hesitant businesses nervous about spending sufficient encouragement to invest in new assets.
• Jarod Chisholm is a tax advisory managing partner at Findex (NZ). The views and opinions expressed in this article are those of the author and do not necessarily reflect the thought or position of Findex.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
NZ Herald
4 days ago
- NZ Herald
Shane Te Pou: 6 ways Christopher Luxon can save his Prime Ministership
Luxon spent enough time in corporate management to know that a CEO delivering numbers like that is in danger of getting the chop. He also likes to boast of his credentials in doing 'turnaround jobs'. Well, he needs one now. So, how can Luxon get his Prime Ministership 'back on track'? It's the economy, stupid New Zealand's economy isn't just bad – it's one of the worst in the developed world. We had a deep recession last year; other countries did not. And we're looking at round two. Partly, that's due to the Government suddenly cancelling, delaying or scaling back a bunch of infrastructure work, which contributed to the large loss of construction jobs. Partially, it's soaring energy prices killing our manufacturing sector. You can launch all the policies with energetic names like Investment Boost and Going for Growth you like; it doesn't matter if none of them move the needle. You spend your time trying to blame Labour for spending during a pandemic, while borrowing even more yourself for tax cuts; it doesn't create a single job. You can't spin away a crisis. It's time to take this seriously. Increase government investment and fix the energy shortage. Talk to us like adults You can practically hear the groans across the suburbs each Monday morning as Luxon whines 'well, what I would just say to you is' before repeating the same old talking points on his weekly media round. You're not trying to sell us soap, Mr Luxon. Show us you have a brain and treat us like we have brains, too. Give us genuine, considered thoughts and answers on the issues facing New Zealand. Is Christopher Luxon looking likely to be the first National Prime Minister to last only one term? Photo / Mark Mitchell Have a heart Before the National Party conference, party president Sylvia Wood said the problem is voters aren't seeing Luxon's 'humanity'. I agree. It's hard to see the humanity when he labels poor New Zealanders as 'bottom-feeders', scraps the pay equity process for 180,000 low-income workers and restricts access to emergency housing. If he is a humane guy, it's time to show it. As a Christian, Luxon must know Matthew 7:16: 'By their deeds you will know them.' Spend more time at home When Luxon said he was going to be a Prime Minister who didn't spend a lot of time inside the Wellington beltway, I don't think many of us realised just how far away he planned to be. I'm a man who likes to travel, but Luxon is taking it too far. At least one overseas trip a month, often on some pretty thin premises (what was he doing in Papua New Guinea the other week?) and with very little to show for it in diplomatic outcomes. Spend less time in the Koru Club and more time at the desk. Don't be afraid to change direction No one could accuse Luxon and his ministers of lacking self-confidence. They've ripped up ferry contracts, water reforms, light rail plans, the state house building programme, the RMA Act, the NCEA and more – all with the blithe assumption that they'll come up with something better. It's not exactly working out great, eh? Maybe it's time to revisit some of those impulsive decisions. Maybe it wasn't a great idea to borrow $14 billion for tax cuts and increase the Government's debt. Maybe, it's time to have the humility to adopt some of the Opposition's ideas, rather than reflexively scoffing at them. Pull the minor parties into line Luxon failed from the start to exert any authority over Act and New Zealand First's ministers. Casey Costello's dealings with tobacco companies should've seen her sacked. Karen Chhour's bootcamps disgrace would normally see the portfolio taken off her. Luxon's done nothing. Yeah, Winston Peters and David Seymour can threaten to pull down the Government if Luxon disciplines their ministers. But would they? It would cost them more than him. Have some guts – look them in the eye and see who blinks first. All is not lost for Luxon. But he's looking more and more likely to be the first National PM to last only one term, or less, unless he changes his ways.
NZ Herald
13-08-2025
- NZ Herald
Covid spending can be justified, despite Treasury report
Coverage of this report has focused on an implication that Treasury were opposed to much of the Covid-19 response and had sought to limit the extent of Government spending. Others have noted that the report does not say this directly, though the selective quotes from advice at different stages do not exactly discourage this reading. In the interests of full disclosure, I was an adviser to the Minister of Finance Grant Robertson from December 2020 onwards. Unsurprisingly, my perspective often differed from Treasury (which in some ways was a key required skill for that job), and readers may reasonably take that into account in the criticisms that follow. The risks highlighted in the report around the use of fiscal policy tend to underline the view that 'cyclical management should mostly be left to monetary policy run by an independent central bank'. This is not a new position – it is such an established aspect of economic orthodoxy that it is known as the 'consensus assignment'. Finance Minister Grant Robertson during the pandemic. Photo / Pool Why, then, would we use fiscal policy in response to a shock? Recent decades have seen very low interest rates, and therefore situations where central banks cannot cut rates to the level they believe necessary to support the economy. This issue is known as the 'effective lower bound' and was one of the major preoccupations of economic debates following the global financial crisis. However, it was clear that Treasury had done limited thinking on how fiscal policy should be used in a crisis. This was despite the fact that the official cash rate was just 1% as the pandemic approached. I recall my surprise at being briefed on a work programme to review Treasury's macro-economic framework – thinking that I would have assumed it had already taken place sometime in the previous decade. At different stages Covid-19 required spending to support overall economic activity (i.e. stimulus) as well as more targeted spending for workers and businesses directly affected by lockdowns. The LTIB notes that Treasury did support large-scale spending responses in the initial stages, but then 'advised shifting towards more targeted fiscal support and recommended against further stimulus from Budget 2022 onwards'. Covid-19-related supports had continued during this period, because large numbers of New Zealanders continued to be affected by Covid-19, most notably during the Auckland lockdowns. But the purpose of this spending was to support people and businesses during a time when normal economic activity was not possible, not to stimulate more economic activity. Despite the large initial cost of the wage subsidy scheme in 2019/20, the largest year for Covid-related spending was actually 2021/22, owing to the combination of business support programmes and the ramping up of the national health response. Former Beehive staffer Toby Moore. Photo / Supplied A further, separate category of spending is funding allocated through the Budget operating allowance, which is typically a mix of new spending and the increased cost of existing spending (cost pressures). In late 2021, the operating allowances for upcoming budgets were increased compared to what was previously signalled. Treasury has at times raised concerns that adjusting future allowances might undermine credibility; however, it was not an uncommon occurrence for parts of Treasury to raise such concerns and for other parts of Treasury to put advice to the Minister suggesting that allowance should increase. It is important to understand that budget allowances are not an end in themselves. Adhering to previously planned allowances come what may does not amount to a sensible fiscal strategy, and governments tend to put more focus on whether those allowances are contributing to them keeping debt or deficit levels in line with their intended objectives. The operating allowance for Budget 2022 was large, at $6 billion. But based on forecasts at the time, that level of spending was consistent with Government debt peaking at a much lower level than earlier forecasts, and the Government's books returning to surplus much earlier, in 2023/24. At the point Treasury states that they were not advising further stimulus, this was very much the Government's view as well. Economic and fiscal forecasts were looking much different from mid-2022 onward, and the economy continued to slow as the Reserve Bank tightened interest rates in response to rising inflation of the sort that was experienced around the world. While larger proportions of budget spending during this period were trying to maintain existing public services in the face of high levels of inflation, the other side of this story is the fact that forecast tax revenue has continually failed to eventuate. Prime Minister Jacinda Ardern during the pandemic. Photo / Mark Tantrum Ahead of Budget 2024, Nicola Willis alluded to a further downgrade in economic and fiscal forecasts, saying 'Sadly, I've learned to dread what comes out of the forecasters' mouths when they come into my office'. If nothing else, this is a sentiment shared across successive offices of the Minister of Finance. Repeated downward revisions of the tax-to-GDP ratio over time means that Budget 2025 forecasts for the current fiscal year are a full 3.3% of GDP lower than what forecasts in mid-2022 had anticipated. This has contributed to OBEGAL surplus getting pushed further out in the forecast period (and more recently, only showing surpluses on the Government's self-invented measure, OBEGALx). If decision-makers had cared only about inflation and nothing else, fiscal policy could potentially have done a lot more to reduce economic activity. With the Government not willing to resort to tax increases, more contractionary fiscal policy would have meant absorbing more of the burden of constraining demand through deteriorating public services, with the Reserve Bank having to do less through the OCR. Given the ongoing pressure on the health system today, we should be glad this was not the path that was taken. But far from being critical of this Budget spending, Treasury was also raising concerns that spending was not high enough. In the half-year update in 2022, Treasury expressed concern about what it described as the largest fall in real government consumption since 1987. As late as October 2022 Treasury was advising the Minister of Finance to increase the allowance for the next Budget from $4.5 billion to $5b. This incongruous array of advice was not a matter of mutinous radicals seizing control of the Government's lead economic adviser. Treasury was trying to tread the same narrow path that the Government was. The economy as a whole was hitting up against its capacity, and vulnerable New Zealanders needed targeted support towards the cost of living. Every dollar of additional spending risked adding to inflation and every dollar of spending that was withheld meant that rising costs would hit core government services or households directly. It is appropriate that we try to learn lessons from the experience of Covid-19. It is reasonable for people to disagree with some aspects of the fiscal response and it is highly unlikely that every decision taken was the right one. But the economic response was overwhelmingly guided by officials' advice rather than contrary to it. There may now be unease among some public servants about the level of debt that New Zealand assumed or the spending pressures that it is facing. But the other side of that debt is the businesses that are still operating, the people who were kept in work and the loss of friends and family members that were avoided because NZ chose to support each other through that most complex and challenging time. Toby Moore is a doctoral candidate at Te Herenga Waka - Victoria University of Wellington and was previously a senior adviser to former Finance Minister Grant Robertson. He is also on the Labour Party's policy council, though the views here are his own
Otago Daily Times
12-08-2025
- Otago Daily Times
Tail-wagging jibe may have Labour worried
Analysis by Craig McCulloch The most telling line out of the Green Party's AGM held over the weekend was not its claim to be leading the opposition, nor its ambitions on leading the next government. Such lofty goals are to be expected as all parties try to motivate members at their annual conferences. More interesting was an observation from co-leader Marama Davidson, dropped almost as an afterthought near the end of Sunday's media conference. "Setting the agenda isn't just about numbers," she said. "We've got a government right now whose tail is being wagged by two smaller parties." The subtext is clear: if Act New Zealand and New Zealand First can have a disproportionate influence — as David Seymour likes to put it — then why not the Greens, alongside perhaps, Te Pāti Māori? That framing is politically dangerous for Labour. National will seize on it, warning of a Labour government beholden to its minor partners. Remember previous attempts to tie Labour to the Greens' wealth tax. Those attacks might be undermined somewhat by its own coalition tensions, but they will be aided by Labour's current policy paucity. If Labour's manifesto remains light on detail for too long, the Greens could end up setting the agenda and the terms of debate by default. That is where the Greens' claim of opposition dominance has some merit. They have pumped out a suite of detailed policies on tax, climate and industrial strategy this term, while Labour has deliberately kept its powder dry. Co-leader Chloe Swarbrick pointed to this year's Budget day, claiming ministers spent most of their time talking about the Green Budget. But that also proves the problem for Labour: Chris Hipkins and finance spokeswoman Barbara Edmonds spent weeks after the Budget being questioned about the Greens' plan, to their obvious frustration. Labour will look to correct that imbalance as the election gets closer. But in the meantime, it risks losing support to the Greens' big talk. Monday's Taxpayers' Union-Curia poll suggests that has not happened yet. The poll records Labour on 33.6% — the most popular party in Parliament — with the Greens just under 10%, more than 20% behind. That severely undercuts the Greens' self-styled role as the main force on the centre-left. However, look deeper and the polling shows voters are lukewarm on all party leaders. Christopher Luxon and Chris Hipkins are level-pegging as preferred prime minister, but on numbers that would have been considered dire in previous cycles. In that environment, a smaller party talking up its ability to call the shots could help mobilise its supporters — or it could alienate swing voters wary of instability. Both would be a concern for Labour, although again, a similar tension will play out on the centre-right as well. Ms Swarbrick's push for the Greens to reach beyond its comfort zone — to miners, mill workers, even farmers — recognises the need to expand its base. The question is whether those voters can realistically be convinced to back a party long associated with a different set of priorities and values. For now, the Greens remain what they have been for years: a minor party with a loyal base and a clear agenda. Their claims on leading the opposition are more marketing than reality. Still, in a race this tight, marketing might make the difference. • Craig McCulloch is RNZ's acting political editor.
