franchise.co.nz – PUTTING PEOPLE IN BUSINESS
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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.
Franchise Accountants review the
tax incentive that could save
franchisees thousands
INVESTMENT
BOOST
Buying a Franchise
Franchise Accountants
www.franchiseaccountants.co.nz
Contact
Philip Morrison & Hayden Cargo
0800 555 80 20
hcargo@franchiseaccountants.co.nz
pmorrison@franchiseaccountants.co.nz
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