And there we have it—Budget 2025 is out in the wild.
It’s always a bit of a moment for us tax types, because while the budget focuses on spending, it’s tax that determines how much there is to spend—so tax tweaks are often part of the announcements.
Sadly (for those who enjoy surprises), the good stuff is usually leaked early. Not this time. While changes to depreciation rules were rumoured, few expected the scale of Investment Boost.
In simple terms, Investment Boost lets you claim a 20% deduction of an asset’s value in the year you acquire it. The remaining 80% is depreciated as normal.
Here’s what you need to know:
Tevita, a self-employed real estate agent, replaces his old car with a $50,000 EV on 1 June 2025. He uses it 100% for business and applies the 30% Diminishing Value depreciation rate.
For the year ending 31 March 2026 (owning the car for 10 months), his depreciation looks like this:
Investment Boost deduction: $50,000 × 20% = $10,000
Normal depreciation: ($50,000 – $10,000) × 30% × (10/12) = $10,000
Total deduction: $20,000
With a taxable profit of $200,000, Tevita’s tax bill would be $57,077 without deductions. The $20,000 deduction saves him $7,800 in tax.
On 1 December 2026, he sells it for $40,000. After the prior year’s deductions, the book value is now $30,000, so he’s made a $10,000 taxable gain. At his tax rate, that’s an extra $3,900 to pay. In other words, he’s back where he started before Investment Boost.
This is the sting in the tail of Investment Boost. You get an upfront tax break, but if you sell the asset early, you may have to pay some of it back.
To an extent—it softens the cost of acquiring new assets, especially if financed. But the benefit is only 20% of the asset’s value times your tax rate (so for a company, 5.6% of the asset’s cost), and you only see it when you file your return. You also reduce future depreciation, and may face tax on resale.
In the end, you’re just deferring tax, not avoiding it. Keep that in mind when eyeing that new piece of machinery.
Also, watch this space in terms of how this will be incorporated into accounting software—they’re currently not set up to accommodate this.
The main thing that will affect most businesses is the increased minimum Kiwisaver contribution rates. From 1 April 2026, the default minimum contribution rates for employers and employees increases to 3.5%, rising to 4% from 1 April 2028. There is an option for Kiwisaver members to go back to 3% (matched by their employer), but this is an annual election.
Additional changes:
While not a huge change, it will affect wage bills—something to keep in mind during upcoming salary reviews and broader business planning.
The overall tone of this year’s Budget reinforced the government’s commitment to cutting spending across the board.
Numerous initiatives have had their funding reduced or cut entirely, and many planned expenditures have been deferred or cancelled.
If the government is one of your main customers or funding sources, it’s worth considering how reduced public spending might impact your business—and planning accordingly.
As always, don’t hesitate to reach out if you’d like help to work through the implications of any of these changes.
Alex Cull, Tax Partner
[email protected]
If you’re reading this long after the published date, please get in touch to see if it’s still relevant.
