INVESTMENT BOOST

The 2025 Budget introduced a powerful new initiative designed to help Kiwi businesses reinvest and grow. Known as the Investment Boost, this tax incentive offers significant savings for business owners who purchase new assets, plant, or equipment from 22 May 2025 onwards.

For franchise owners – whether you’re buying into a new opportunity or upgrading an existing outlet – this initiative can deliver real financial benefits. Here’s what it means, how it works, and why it matters to you.

What is the Investment Boost?

The Investment Boost is not a cash grant or tax credit. Instead, it allows you to claim an additional 20% upfront deduction on eligible assets in the first year of purchase. The balance (80%) is then depreciated over time at standard Inland Revenue (IRD) rates.

Depreciation reflects the reality that business assets wear out and lose value as they’re used to generate income. For example, a coffee machine in a café won’t last forever – it experiences wear and tear. The tax system recognises this by allowing you to claim depreciation as an expense.
With the Investment Boost, you get to bring forward 20% of that depreciation in the first year, reducing taxable profits and, in turn, lowering your income tax bill.

How does it work? 

Suppose a new franchise spends $250,000 on a shop fit-out. Under the scheme, $50,000 (20%) is claimed immediately as a deductible expense in year one. The remaining $200,000 is depreciated over the asset’s useful life at normal IRD rates. 

If the business is trading profitably and operates through a company, the immediate $50,000 deduction reduces taxable profit. At the 28% company tax rate, that equates to a $14,000 tax saving in the first year – a tangible benefit for cash-conscious franchisees. 

There are further benefits for franchisees and other business owners.

Improved cash flow

The tax savings remain in the business, providing an immediate cash flow boost. For a new start-up, this extra working capital can help cover operating expenses and reduce financial strain in the critical first year.

Better debt servicing

Stronger cash flow means more capacity to service loans. For franchisees who borrow to fund fit-outs or equipment, the incentive accelerates payback and lowers financing risk.

Enhanced productivity and competitiveness Investment is about more than numbers – it’s about staying competitive. A café refurbishment, for example, can refresh the look and feel of the store, attracting more customers. Upgraded equipment can also reduce downtime and increase efficiency.

Lower ongoing costs

New plant, equipment and fit-outs generally require fewer repairs and less maintenance. That means lower running costs in addition to the tax benefits.

Why it matters

For franchise buyers weighing up risk versus reward, the Investment Boost helps strengthen the case for investing. By lowering upfront costs through tax savings, it may improve both the sustainability and viability of the franchise business model.

The Investment Boost is designed to encourage Kiwi businesses to invest and grow. For franchisees, it can provide a meaningful head start – reducing tax, freeing up cash, and supporting smarter investment or reinvestment decisions.Whether you are entering a franchise for the first time or upgrading an existing location, this incentive has the potential to strengthen your financial position and improve business performance.

Tax incentives can be powerful tools, but every franchise is unique. Before making the decision to invest in a franchise or re-invest in your existing business, seek advice from the experts at Franchise Accountants. They can help you structure your investment in the most tax-efficient way, ensuring you maximise the benefits of the Investment Boost while keeping your business on a sustainable footing.  

See this advertorial on page 49 of Franchise New Zealand magazine Year 34 Issue 3

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