With effect from 22 May 2025, the Government launched a new tax incentive called Investment Boost. It made headlines at the time, but as is often the case with policy changes, the initial noise dies down and life goes on.

Now that things have settled a bit, it’s a good time to take a second look, to check in re whether it’s something that fits into your business strategy.

So, what is Investment Boost?

In simple terms, if you buy an eligible asset, say a new piece of machinery, a vehicle, or some tech equipment, you can immediately deduct 20% of its cost from your taxable income, on top of the usual depreciation you’d claim.

That means a lower tax bill in the year you make the purchase, which sounds like a win. The Government says this is about encouraging growth and boosting productivity and for some businesses, it could do just that.

But here’s the thing...

This is about cash flow, not just tax

A lower tax bill can be helpful, sure. But it doesn’t magically make a new purchase affordable.

Let’s say you want to spend $10,000 on new equipment. With Investment Boost, you are allowed $2000 extra depreciation on that spend, plus you are allowed the normal depreciation on the remaining $8000 portion, so let’s say another $2,400 for example at a 30% rate. But remember, that’s not money in your pocket. It results in a reduction in cash income tax payable of say $1200- $1700 depending on your circumstances. The net effect of $10,000 less reduced cash tax payable $1200- $1700, is an after tax cost of around $8,300 - $8800 on that $10,000. 

Another thing to remember, is an income tax benefit now, will impact your March 2026 year income tax to pay, so there is a time lag for the associated tax payments to roll around.

So a key question becomes; Is this something you were planning to buy anyway? Or are you buying it mostly because there’s a tax break attached? 

Don’t overcommit because the numbers “look good”

If a new asset genuinely moves your business forward, you both need and can afford it, then this incentive is a win and more power to it. That said, we’ve also seen businesses trip up by chasing tax perks without thinking about the longer-term impact on their cash flow.

Consider whether you would be stretching your budget now, and whether that would mean you're struggling to pay suppliers, hire staff, or weather a quiet month later. Sometimes the tax saving might come at too high a cost. Knowing your future cash flow projections is crucial for your decision making.

It’s not a one-size-fits-all opportunity

Some businesses are in growth mode and/or still have solid cash flow. Others are still rebuilding after a tough few COVID years. For some, this tax break will exactly what is needed for their pre-existing plans. For others, it could create stressful cash flow 10-12 weeks down the track. This is why understanding your specific business context, matters.

So, what should you do?

We always say, before you make any big spending decisions, especially off the back of new tax policy, have a chat with your accountant or adviser. Not just to crunch the numbers, but to talk about your goals, your cash flow, and the timing of any major investments.

Even if you’ve already bought something and you’re wondering how this change affects you, it’s still worth checking in.

The bottom line:

Investment Boost is a useful tool, and is better than having no stimulus, but it’s not a magic fix. Like anything in business, the value lies in how and when you apply the changes. So now that the noise has died down, let’s sit down, look at the big picture, and figure out if this is the right time, and the right move, for you. 

Because good business isn’t just about saving on tax. It’s about making smart, sustainable decisions that keep your business moving forward, one step at a time. To achieve the type of life you want.

Want some complimentary business or tax advice? Reach out to us for a no-obligation, no charge chat. Love to you, from Love to Grow