Budget boost for investment

The “centrepiece” of Budget 2025 is a tax incentive for businesses to invest in productive assets such as machinery, tools and equipment. 

Called Investment Boost, it allows companies to deduct 20 per cent of a new asset’s value from that year’s taxable income in addition to normal depreciation. 

The idea is that because cashflow from investments improves, more investment opportunities become financially so more take place, say Nicola Willis, Minister of Finance. 

Business investment, in turn, raises the productivity of workers, lifts incomes and drives long-term economic growth. 

By increasing the stock of capital in New Zealand, Investment Boost is expected to lift GDP by one per cent and wages by 1.5 per cent over the next 20 years, with half of these gains in the next five years. 

Investment Boost will make New Zealand a more attractive place to invest, says Willis, pictured, because it gives businesses facing global uncertainty a reason to keep investing.

The policy applies to all new assets purchased in this country, as well as new and used assets imported. It covers commercial buildings, but not land, residential buildings or assets already in use.

Willis adds: “Our government knows businesses have been knocked around by challenging local and international economic conditions. This tax incentive shows we are backing them to succeed.

“There’s no cap on the value of eligible investments. All businesses, regardless of size, can benefit. Investment Boost delivers more bang for buck than a company-tax cut because it only applies to new investments, not those made in the past.”

“Now is the right time to support New Zealand’s economic recovery by making it easier for businesses to invest, hire more workers, pay them better and contribute more to our long-term prosperity. Investment Boost delivers the confidence injection business needs.”

The tax credit is expected to cost $1.7 billion a year in reduced revenue. Overall, the coalition has slashed an average of $5.3b in government spending for each of the next four years in this year’s budget.

The cuts are counterbalanced by new spending of $6.7b a year, mostly through increased budgets for health, education, law and order, and defence.

Most government departments have received limited or no extra funding this year, meaning they will have to absorb increases in costs, such as wages.

Roads to recovery 

North Island communities still building back after the 2023 cyclone and floods will get extra funding to complete recovery works on local roads, says Chris Bishop, Minister of Transport.

“Last year’s budget invested nearly $1b into projects in regions hit by Cyclone Gabrielle and the Auckland Anniversary weekend floods. 

“The government remains committed to communities working to rebuild lives and neighbourhoods. This budget provides $219 million in additional funding to help get local roads repaired as quickly as possible.”

The NZTA will distribute the funds to local councils to complete recovery works across affected local roads. Five councils will likely receive a share of the $219m over three years from 2026/27. They are Central Hawke’s Bay, Gisborne, Hastings and Wairoa district councils, and Napier City Council.

Bishop says: “A resilient transport network in the East Coast and Hawke’s Bay regions will help deliver the infrastructure communities need to grow their businesses, get their kids to school and ensure goods get from A to B efficiently.”

As for trains, more than $600m will be spent on upgrading the rail network. There’s $461m for maintenance on freight lines, and $143.6m to replace and upgrade passenger lines serving Auckland and Wellington.

Retirement changes

As widely expected, this year’s budget included significant changes to KiwiSaver affecting employers, employees and the government.

The annual government contribution has been halved to a maximum of $260.72 from July and scrapped for those earning more than $180,000 a year.

The default rate of employee and employer contributions will be gradually increased from three to four per cent over a three-year period, although workers can temporarily opt to stay at three per cent for a year at a time. The scheme will be expanded to fully include 16 and 17-year-olds from April 2026.

Prospecting for gas 

The coalition has set aside $200m over four years for co-investment in new gas fields. This will see the state take a 10-15 per cent stake in new gas-field developments that feed the domestic market, reducing the risk that future governments will reinstate a ban on offshore exploration.

“Developing an offshore gas field from exploration to production can carry a billion-dollar price tag and projects of this scale are likely to need offshore investment,” says Shane Jones, Minister for Resources. 

“Having skin in the game as a cornerstone investor in production demonstrates our own commitment to meeting our future gas needs.”