After years of budget announcements offering no significant tax relief measures for businesses, the new Investment Boost incentive announced as part of the government’s Budget 2025 aimed at driving economic growth, took the commercial and industrial property market by surprise.

Bayleys Valuations national director plant, equipment and infrastructure Tony Pratt says Investment Boost will be a welcome tax deduction for businesses looking to acquire new operational assets, and for owners of qualifying commercial and industrial buildings.

“Effectively an accelerated depreciation measure, Investment Boost allows businesses to claim 20 percent of the cost of qualifying new business assets like plant and equipment purchased on or after 22 May 2025 as an expense against taxable income in the first year, then claim depreciation as usual on the remaining 80 percent,” says Pratt.

“It also applies to the purchase of new commercial and industrial property assets, new capital improvements, and seismic, or other upgrade works to depreciable property, again with the proviso that the property must have been available for use on or after 22 May 2025.

“As there is no value limit, Investment Boost will provide quantifiable benefit to building owners meeting the eligibility criteria, and could be the stimulus the market has been looking for.”

Pratt says an owner-occupier looking to purchase a premises for their business could buy a qualifying new building and claim the 20 percent investment boost in the first year, along with getting the benefit for any new plant or equipment purchased.

“For those that were marginal about becoming owner-occupiers, Investment Boost could be the incentive to get them into a property and to make the dollars work.

“It is key, however, that building owners and investors ensure that they separate the cost of the fit-out from the building structure itself shortly after sale completion and before the end of the first tax year to ensure they get the normal fit-out depreciation for year 1 and annually thereafter, as well as the boost.

“Business owners should seek advice from trusted professionals for clarification to maximise any benefit, and ensure that accounting software packages can handle the new calculations.”

Property Council New Zealand welcomes the Investment Boost initiative commenting in Bayleys’ latest issue of Total Property that the upfront tax deduction for new asset purchases – with no cap – is a significant incentive that’s likely to drive tangible outcomes across the commercial property sector.

“It’s a strong signal to invest, whether in new developments or by reinvesting those savings into improving existing buildings. Ultimately, it's a smart lever to support growth, enhance the quality of our building stock, and lift overall productivity,” says Property Council chief executive Leonie Freeman.

Residential buildings and other forms of rental accommodation are currently excluded from the Investment Boost initiative, and while there are carve-outs for hotels, motels, hospitals and rest homes, Property Council believes the emergent build-to-rent (BTR) asset class should be included.

“The BTR sector is gaining real momentum in New Zealand and typically attracts large-scale institutional investment. For many of these projects, Investment Boost could be the factor that tips a development from unfeasible to viable, unlocking much-needed housing supply in our urban centres.

“Under current settings, BTR falls into the excluded category of rental accommodation, and we’ve already begun advocating for a broader definition that recognises the unique role BTR plays in addressing New Zealand’s housing needs.”

Freeman says like any government policy, Investment Boost’s future isn’t guaranteed and there’s already speculation that future governments may look to scale it back or introduce a cap.

“For businesses considering capital investment, timing is key. We encourage those looking to leverage the incentive to act while the window of opportunity remains open.

“Certainty and continuity are critical to long-term investment planning and as sector advocates, we’ll be drawing on member experience and real-world examples of how businesses are leveraging Investment Boost to deliver wider economic and community benefits.

“We’re focused on demonstrating the tangible benefits of Investment Boost to help build the cross-party support needed to keep this policy in place, and ideally, broaden its reach.”