Budget 2025: $1.7 billion annual incentive to businesses to bring forward investments

Thursday, 22 May 2025

Investment and productivity growth have been lagging; Investment Boost is the Government’s big plan to try to reverse that.

The speed at which businesses can claim tax deductions for investments in capital items such as machinery and computers will be speeded up in a bid to bring forward investments and give a fillip to economic growth.

The move, sometimes referred to as enabling ‘accelerated depreciation’, is more generous than some experts had expected ahead of the Budget, and is expected to cost the Government $1.7 billion a year in lost tax revenues over the next four years.

Instead of tinkering with the existing detailed depreciation settings, the Government has opted to immediately allow businesses to deduct an additional 20% of their new investments in capital assets in the first year of each investment.

That heavily front-loads the overall benefit from depreciation rules.

Finance Minister Nicola Willis said the Budget initiative — dubbed Investment Boost — was a “major new tax incentive to encourage businesses to invest, grow the economy and lift wages”.

The Treasury and Inland Revenue estimated Investment Boost would increase GDP by 1% and wages by 1.5% over the next 20 years, with about half of those gains coming in the first five years, she said.

Business investment is currently sitting in the doldrums, reflected in increases in bank lending to businesses lagging inflation and also falling in nominal terms in February and March.

John Cuthbertson, tax leader of Chartered Accountants Australia and New Zealand, said ahead of the Budget that acclerated depreciation would provide “good bang for the buck” in redressing that trend.

Willis characterised Investment Boost in similar terms.

“Investment Boost delivers more bang for the buck than a company tax cut because it only applies to new investments, not those made in the past,” she said.

The higher upfront deductions will apply to all new and used assets, including commercial buildings, but not land and “assets already in use”.

As an example, a business than invested $200,000 in a new piece of manufacturing equipment would reduce their tax bill by $10,000 in the first year of their investment, as a result of the change, Willis said.