Every March, New Zealand business owners hear the same advice: “buy it before 31 March for the tax deduction.” Sometimes that’s smart. Often it’s half-true. This guide explains how depreciation actually works, what Investment Boost changed in 2025, and how to decide whether timing a purchase is worth it.
How depreciation works in New Zealand
When you buy an asset that will last more than a year — a machine, a vehicle, a computer, a fit-out — you usually can’t deduct the full cost straight away. Instead you depreciate it: claim a portion of its cost each year over its useful life, at rates set by Inland Revenue for that type of asset.
Two methods:
- Diminishing value (DV): a fixed percentage of the remaining (written-down) value each year — bigger deductions early, smaller later.
- Straight line (SL): the same dollar amount each year.
Inland Revenue notes the total depreciation over an asset’s life is the same under both; DV just front-loads it.
Part-year depreciation
In the year you buy an asset, depreciation is calculated for the number of months you owned it in that income year. Buy a $60,000 excavator in March (for a 31 March balance date) and you get one month’s depreciation — useful, but modest.
The low-value asset write-off
Assets costing less than $1,000 can generally be written off immediately rather than depreciated. The threshold was temporarily $5,000 between March 2020 and March 2021, and returned to $1,000 from 17 March 2021.
Watch for splitting: items bought together that work as a set (for example, a set of matching office furniture) may be treated as one asset.
Investment Boost (from 22 May 2025)
Budget 2025 introduced Investment Boost, one of the biggest changes to business asset taxation in years:
- Businesses can deduct 20% of the cost of qualifying new assets up-front in the year the asset is first available for use.
- The remaining 80% is depreciated as normal.
- It applies to assets first available for use on or after 22 May 2025.
- There’s no cap on the value of investment.
What qualifies
According to Inland Revenue, qualifying assets include:
- assets that are new, or new to New Zealand (for example, used machinery or vehicles imported from overseas);
- new commercial and industrial buildings;
- improvements to depreciable property (but not residential buildings);
- certain primary-sector land improvements.
What doesn’t
- Second-hand assets sourced from within New Zealand;
- residential rental buildings;
- most fixed-life intangible assets such as patents.
The effect: an example
Example scenario — illustrative only. A Hamilton engineering firm buys a new CNC machine for $200,000, available for use in February. With a 31 March balance date:
| Without Investment Boost | With Investment Boost | |
|---|---|---|
| Immediate deduction | — | $40,000 (20%) |
| Depreciable base | $200,000 | $160,000 |
| Part-year depreciation (2 months, illustrative rate) | smaller amount on $200,000 | smaller amount on $160,000 |
| First-year deductions | Low | Materially higher |
The 20% deduction alone reduces the firm’s taxable income by $40,000 in that year. At the company tax rate that’s a meaningful cash saving — though it’s a timing benefit, as later depreciation is lower.
So should you buy before 31 March?
Only if all of these are true:
- You genuinely need the asset. A deduction on something you don’t need is still a cost.
- It will be available for use before balance date. Ordered isn’t enough — it generally needs to be delivered and ready to use.
- You have taxable profit to deduct against this year.
- The cash or funding is sensible. Draining working capital for a tax deduction can create a bigger problem.
If those line up — especially for a qualifying new asset under Investment Boost — timing can bring a worthwhile deduction forward by a full year.
What about selling assets?
If you sell a depreciated asset for more than its tax book value, the excess depreciation is generally recovered as income. Factor that in when replacing equipment.
Funding the purchase
How you pay usually doesn’t affect depreciation or Investment Boost — the deduction follows the asset’s cost and when it’s available for use. Interest on business borrowing is generally deductible too. Options include:
- Equipment funding — property-secured from $20,000 up to $1m, or unsecured based on turnover;
- Business vehicle funding — utes, vans and trucks, new or used, dealer or private;
- Lease vs buy vs borrow — the trade-offs of each approach.
A pre-balance-date checklist
- Confirm the asset is genuinely needed and will earn or save money.
- Check with your accountant whether it qualifies for Investment Boost.
- Confirm delivery and installation dates — it needs to be available for use before balance date to count this year.
- Get the funding approved early; don’t leave it to the last week of March.
- Keep invoices, delivery dockets and commissioning records.
- Check GST: if you’re registered, the GST on the purchase can generally be claimed in the period it’s paid or invoiced.
Check with your accountant
Depreciation rates, Investment Boost eligibility and timing depend on your specific assets and balance date. This guide is general information; your accountant should confirm the tax treatment before you commit.
If a purchase makes sense and you need to fund it, send a 60-second enquiry — it doesn’t affect your credit score.