Budget Day 2025 has come and gone, but it left more questions than answers. Typically, we provide members with a summary of key announcements on the day, but this year we found ourselves grappling with uncertainty – particularly around how the new Investment Boost would work in practice and what it would mean for our sector.
Now, following initial conversations with the IRD, we’re pleased to share our analysis of what you need to know.
The surprise announcement of Investment Boost, allowing businesses to receive a 20% tax deduction on the value of an asset, could have positive outcomes for the property and construction sectors.
Importantly for building owners and developers, Investment Boost applies in three key scenarios:
- When a developer constructs a new commercial or industrial building for use in their own business;
- When a company purchases a new commercial or industrial building; and
- When capital improvements – such as significant strengthening work – are made to an existing building.
Read more under the Political Analysis below.
Key points for the property sector
- $6.4 billion Investment Boost over four years. This allows businesses to immediately deduct 20% of the cost of new productive assets – on top of normal depreciation – significantly reducing tax in the year of purchase. This includes machinery, tools, equipment, technology, vehicles, new industrial and commercial buildings and other capital assets. It does not include land, residential buildings, assets used overseas by a New Zealand business or existing buildings.
- Importantly for building owners and developers, Investment Boost applies in three key scenarios: when a developer constructs a new commercial or industrial building for use in their own business, when a company purchases a new commercial or industrial building, and when capital improvements – such as significant strengthening work – are made to an existing building. Read more under our Political Analysis below.
- $85 million over four years for newly created Invest New Zealand, an entity responsible for attracting investment to New Zealand.
- $1 billion investment to upgrade and expand hospitals across the country. This will fund the Nelson Hospital Redevelopment and Wellington Regional Hospital Emergency Department refurbishment.
- $712 million capital and $234 million operating expenditure for new classrooms and school property maintenance, including funding for approximately 10,000 additional student places.
- $464 million capital and $141 million operating expenditure for rail maintenance to increase the reliability for commuters and freight in the Auckland and Wellington metro areas, and to replace ageing bridges, culverts and other assets to ensure goods can get to and from our farms, manufacturers and ports.
- $11.8m to Department of Internal Affairs to get Regional Deals off the ground.
The New Zealand economy at a glance
- This year’s operating allowance is the smallest in a decade, $1.3 billion. To put that number in perspective, last year’s budget had a self-imposed cap of $3.2 billion.
- Total capital expenditure is $6.8 billion.
- New initiatives have been introduced in priority areas such as health, education, law and order, defence, and transport.
- The Government plans to lower core Crown expenses to around 30% of GDP.
Where is the money coming from?
- Budget 2025 outlines $6.7 billion in new operating spending across 228 initiatives, offset by $5.3 billion in savings from 116 cost-cutting measures. In addition to these operating changes, the Government has earmarked $4 billion in net new capital investment.
- The coalition has reduced government spending by an average of $5.3 billion per year over the next four years.
- Around half of the savings come from the overhaul of pay equity settings ($12.8 billion over four years).
- Some additional savings measures include:
- Halving the government’s KiwiSaver contributions from $521 to $260.72 per year, with no government contribution for those who earn over $180,000 per annum.
- Tightening welfare eligibility for 18- and 19-year-olds.
- Fully means-testing the Best Start child payments.
- $1.026 billion saved over four years by reducing the number of people living in motels and receiving emergency housing support.
How did the Budget stack up against Property Council’s priorities?
Property Council Priority
Property Council Recommendation
Government Response
Housing
Support community housing providers to delivery more social housing.
Provide for infrastructure and transport that supports housing growth.
- $128 million over four years will deliver at least 550 more social homes in Auckland in the 2025/26 year.
- $82 million total for Upfront Operating Supplement payments for community housing providers in certain circumstances when contracts for new social housing are agreed.
- The Government is establishing Crown lending facilities of up to a total of $150 million for the Community Housing Funding Agency, to help lower the cost of borrowing for community housing providers.
- A new contestable Flexible Fund, replacing previous housing programmes like the Affordable Housing Fund, the Progressive Home Ownership Fund, and remaining Whai Kāinga Whai Oranga funding. The fund consists of $41 million operating funding over four years and $250 million capital funding over the next ten years for additional houses from 1 July 2027. Subject to further design work on the fund, this will enable up to 650-900 social homes and affordable rentals.
Infrastructure
Increase funding and finance for regional and national infrastructure projects that will support housing.
- $219 million in additional operating funding to complete recovery works on local roads that were damaged in the 2023 North Island weather events.
- $1 billion investment to upgrade and expand hospitals across the country, including the Nelson Hospital Redevelopment and Wellington Regional Hospital Emergency Department refurbishment.
- $712 million capital and $234 million operating for new classrooms and school property maintenance, including funding for approximately 10,000 additional student places.
- Government infrastructure investment over the forecast period now totals around $61.8 billion. With a third being spent on transport, and another third towards education and health.
Transport
Funding for future large-scale transport projects that will support housing.
- $64 million a year spent on transport (operating cost).
- $464 million capital and $141 million operating for rail maintenance to increase the reliability for commuters and freight in the Auckland and Wellington metro areas, and to replace ageing bridges, culverts and other assets to ensure goods can get to and from our farms, manufacturers and ports.
Seismic
Provide tax incentives for seismic work on buildings.
- New capital improvements to commercial and industrial buildings are eligible for Investment Boost. For example, significant strengthening of an industrial building. This means businesses can deduct 20% of the total capital spend within the year the improvement is made. There is no cap on what you can claim.
Tax
Make changes to commercial depreciation and overseas investment rules.
- $1.7 billion p.a. for businesses to be able to deduct 20% of a new asset’s value from that year’s taxable income (on top of normal depreciation). This will result in a lower tax bill in the year of purchase and improve cashflow for items such as machinery, tools, equipment, vehicles and technology, and even the purchase of a commercial building itself.
Environment and sustainability
Introduce incentives to encourage commercial property owners to reduce their emissions.
- New capital improvement to commercial and industrial buildings may be eligible for Investment Boost. For determining the deduction, the improvement would be treated as a separate item of depreciable property in the year the improvement is made. We assume this could incentivise sustainable upgrades; however, we recommend you seek tax advice to assess individual circumstances.
Political Analysis
Property accounts for 15% of New Zealand’s GDP. As New Zealand navigates tight economic restraints, the 2025 Budget presents a pivotal opportunity to stimulate growth within the property and construction sectors. It seems the Government has understood that message, while we would have preferred reinstatement of depreciation for commercial and industrial buildings, the Investment Boost announcement is definitely a good step forward.
Investment Boost
Budget 2025 intends to encourage wider business investment through the introduction of a scheme called Investment Boost. From 22 May 2025, businesses can immediately deduct 20% of the cost of new productive assets – on top of normal depreciation – significantly reducing tax in the year of purchase. This will support many businesses, including the property and construction sectors.
The property sector may also be eligible for Investment Boost. This includes new commercial and industrial buildings but excludes land, residential buildings, and assets already in use in New Zealand. There’s no cap on the value of new investments and all businesses, regardless of size, are eligible.
For example, if a commercial building cost $100m to construct and is first available for use on or after 22 May 2025, then it is eligible for the 20% deduction ($20m of the $100m construction cost).
Note: If a company buys an existing building on 24 May 2025, then that company is not eligible for investment boost as the building is not new.
This policy will mostly benefit businesses that have projects currently in the pipeline and are nearing the start of construction.
New capital improvements such as improvements to commercial and industrial properties are also eligible for Investment Boost. For example, significant strengthening of an industrial building. This means businesses are able to deduct 20% of the total capital spend within the year the improvement is made. This may benefit many commercial and industrial properties seeking to do much needed seismic work. We also anticipate this benefiting sustainability upgrades for refits or refurbishments.
We recommend you seek out independent tax advice for more information.
👉 Read the IRD Taxation (Budget Measures) Bill (No 2) Bill Commentary
What about Build to Rent and Student Accommodation Providers?
We are seeking clarity on whether Investment Boost will include Build to Rent and Student Accommodation assets. Property Council will be advocating for the inclusion of these asset classes, as we believe that they are of a similar nature to hotels and retirement villages which are eligible for Investment Boost.
What about Commercial Depreciation?
Budget 2025 announced changes to allow businesses to immediately deduct 20% of the cost of a new asset, on top of depreciation, meaning a much lower tax bill in the year of purchase. While we applaud the incentive for assets, the Government could have restored commercial depreciation, at a much simpler and cheaper cost of approximately $2 billion over four years. We know that the biggest positive step for the sector would be reinstating commercial depreciation for buildings. Unfortunately, Budget 2025 fell short on this front.
Infrastructure delivery is the catalyst for housing growth
Investment in infrastructure and transport can have flow on impacts for housing. Smart investment in infrastructure will result in growth through job creation and housing numbers. Budget 2025 marks for infrastructure spend for schools, hospitals, and roading projects that will have positive impacts effects for the property and construction sector.
The delivery of larger infrastructure and transport/roading projects is critical to the success of housing growth. The property sector are fast market followers. Only the delivery of large infrastructure and transport projects will fuel sector confidence and in turn produce housing growth.
If we want to resolve New Zealand’s challenges, we need to continue to work cohesively to ensure promised projects are delivered.
Conclusion
Budget 2025 has sparked questions about how the new Investment Boost will work – particularly within the property sector. While the reinstatement of commercial depreciation would have been a more straightforward announcement for the Government to communicate, the headline-grabbing 20% tax deduction on asset value is undeniably appealing to a wide range of investors and businesses.
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Author | Katherine Wilson
As Property Council’s Head of Advocacy, Katherine is tasked with leading our advocacy campaigns at both a regional and national level.
Level-headed and engaging, Katherine has both a law degree from Otago University and an arts degree (majoring in politics) from Auckland University. With solid experience as a policy analyst and advisor in Wellington and Auckland, she has extensive networks and solid analytical skills.
Katherine is hugely dedicated, highly intelligent and committed to ensuring the voice of our members is heard at all levels of governance. She’s also relentlessly positive and enjoys a good chat.
