7 Aug 2025

Investment Boost NZ 2025: What it Really Means for Business Vehicles and Leasing

In May 2025, the New Zealand Government launched the Investment Boost initiative — a tax incentive aimed at stimulating the economy and encouraging businesses to buy productive assets like vehicles, machinery, and equipment.

At first glance, the 20% upfront tax deduction (on top of standard depreciation) might sound like a great deal. However, when it comes to business vehicles, leasing may be more beneficial than the boost.

What is the Investment Boost? 

The Investment Boost allows businesses to claim an extra 20% tax deduction in the first year on qualifying new or new-to-NZ assets, including vehicles. This is in addition to the usual depreciation. It applies to any business entity — sole traders, trusts, or companies.

A quick refresher on depreciation:
Depreciation is how much an asset, like a vehicle, loses value over time. Businesses claim depreciation each year to reduce their taxable income, but the asset must appear on the company balance sheet.

What the Investment Boost is Not

The Investment Boost is not a permanent tax break. It’s simply accelerated depreciation – bringing future depreciation forward — known as front loaded depreciation. 

If you sell the vehicle later for more than its reduced book value, you may face depreciation recovery tax, which could cause unexpected tax bills.

This key detail is often left out of ads promoting the boost. For many businesses, this is only a timing advantage, not a lasting saving. For example, front loaded depreciation may increase the risk of paying more tax later if you sell the vehicle for a higher price than what it is worth on the books. 

Leasing vs. the Investment Boost

Operating leases don’t qualify for the Investment Boost because a business isn’t buying a vehicle itself but leases it. This means the vehicle isn’t considered an asset on the business's balance sheet. This can be a positive, not a disadvantage.  

With leasing, 100% of lease payments may be tax-deductible. There’s no risk of depreciation recovery, no large upfront costs, and better (more predictable) cash flow management. Leasing also facilitates regular upgrades to newer, safer, and more fuel-efficient vehicles.

Plus, leasing removes the hassle of resale, maintenance risk, and compliance headaches — and leaves your capital free for more productive investment into your business. 

Myths and Facts About the Investment Boost

“So, I save 20%, right?”
Not really. You can claim an extra 20% depreciation in year one, but you may have to repay some of that when you sell the vehicle. Leasing avoids this entirely, as payments may be fully deductible from day one of the lease.

“It makes sense to own now with the 20% incentive.”
Not always. The boost simply shifts tax savings to the first year. Leasing spreads tax benefits evenly and simplifies accounting.

“It’s cheaper to own now than lease because of the Investment Boost.”
Not necessarily. In many cases leasing delivers a stronger financial outcome. We have a Lease vs. Ownership Tool which was built with a leading NZ accountancy firm that compares the cost of purchasing a vehicle outright against leasing. This tool now includes a comparison of buying under the Investment Boost.

Key takeaway: The Investment Boost isn’t “free money.” It’s just front-loaded depreciation deductions, which can lead to higher costs down the track if resale values exceed book values when your business sells the vehicle. Only the business-use portion of a vehicle qualifies, and accurate record-keeping is essential.

The Bottom Line

The Investment Boost can help certain businesses with short-term tax savings, but for most, the long-term costs and risks may outweigh the benefit.

Leasing, on the other hand, offers:
•    Predictable costs and cash flow.
•    Payments may be 100% tax-deductible. 
•    No risk of depreciation recovery.
•    Access to a modern, safe fleet without tying up capital.

The key is understanding your business’s unique needs and financial position before making a decision and we recommend businesses seek tax advice.

Ready to See the Numbers?

If you are considering upgrading vehicles or reviewing your fleet strategy, now’s the perfect time to compare leasing vs. owning under the Investment Boost.

Our Lease vs. Ownership Tool can be tailored for a businesses' individual circumstances and demonstrate the true cost of each option, so you can make a clear and confident decision.

Contact FleetPartners NZ today to discuss your fleet strategy, compare options, understand how the changes may impact you, and ensure your business makes the smartest decision.

For more information, read the New Zealand Government’s Tax Boost 2025 Factsheet here.   

Disclaimer:
This article is for your general information only and does not constitute professional tax or financial advice. We recommend you speak to a qualified accountant or tax adviser about your specific situation.