New Government Investment Boost: A Game-Changer for Commercial and Industrial Construction
The New Zealand government has introduced an exciting new investment incentive that could significantly impact your next commercial or industrial building project. The Investment Boost allows businesses to deduct 20% of the cost of new commercial or industrial buildings from their taxable income in the year the asset becomes available for use.
What Does This Mean for Your Bottom Line?
This initiative effectively provides a tax saving equivalent to 5.6% of your total building cost. Here’s how it works in practice:
Example Calculation:
- Building Cost: $1,000,000 commercial/industrial building
- Tax Deduction: 20% ($200,000) can be deducted from taxable income
- Tax Savings: $56,000 (28% of $200,000)
- Effective Benefit: 5.6% of the total $1,000,000 building value
Key Requirements and Timeline
To qualify for this investment boost, your building must be used or available for use for the first time after 22 May 2025. Combined with recent reductions in interest rates, this initiative looks to create a strong cashflow advantage for property developers, business owners, and investors.
Frequently Asked Questions
Can I claim the boost for buildings with mixed use? You can claim Investment Boost on the business-use portion of your asset. However, you cannot claim it for portions used for private purposes.
What types of buildings are eligible? New commercial and industrial buildings qualify for Investment Boost. Residential buildings and most accommodation facilities are excluded, though specific exceptions exist for hotels, hospitals, and rest homes.
What about construction projects already underway? If you started construction before 22 May 2025, your project may still be eligible. The key requirement is that the asset must be used or available for use for the first time on or after 22 May 2025.
What happens if my business makes a tax loss this year? The Investment Boost reduces your taxable income by the deduction amount. If your business operates at a loss, the boost will increase that loss, which can be carried forward to offset future taxable profits.
Are capital improvements included? Yes, improvements to depreciable property are eligible if the underlying asset qualifies for Investment Boost. This includes significant upgrades like industrial building strengthening projects.
Can I combine this with R&D tax credits? The Investment Boost deduction qualifies as eligible expenditure for R&D tax credit purposes.
Taking Action
This government initiative, combined with current market conditions, presents a compelling opportunity for businesses considering commercial or industrial construction projects.
At Coresteel, we understand the importance of maximising your investment returns.
Our expertise in commercial and industrial steel construction positions us to help you take full advantage of this opportunity while delivering the quality and durability you expect.
Important Note
This blog post provides a summary of information published by the IRD regarding the New Asset Investment Boost. Coresteel is not a financial advisor and this content should not be considered financial or tax advice.
Tax legislation can be complex and varies depending on your specific business circumstances. We strongly recommend consulting with your financial advisor or accountant to understand how the Investment Boost applies to your particular situation and building project. They can provide tailored advice to ensure you maximise the benefits available to your business.
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Ready to explore how this investment boost could benefit your next commercial or industrial building project? Contact Coresteel today to discuss your construction needs and timeline.