To repair or replace?

As the financial year draws to a close, now is often the time to revisit that to-do list and those jobs you’ve been putting off all year start getting another look. Whether it’s a tractor that has become increasingly temperamental, a set of yards that have seen better days, or a project that’s been sitting on the wish list for months, the question is often the same: should I repair what I already own, or replace it altogether?

The Investment Boost has added another layer to these decisions, with some vendors promoting the incentive as a 20% discount. While the impact on your tax position is important, the first question when considering a significant purchase should be: how will this improve my business?

Remember, you’re not spending a dollar to save a dollar. For a Company in New Zealand, when spending a dollar, you’re saving twenty-eight cents. Accountants have a reputation of being naturally conservative, but we’re not saying don’t spend that dollar! We’re simply encouraging you to consider your options. Before signing on that dotted line, remember that not every dollar needs to be spent on new kit. In some cases, repairing your existing equipment may achieve a similar outcome, at a lower cost and a comparable tax benefit.

In my world (the world of rural accounting that is), not all spending is treated equally. New assets (including those that qualify for the Investment Boost) will be capitalised, and the cost will be claimed over time through depreciation. Some costs, however, are incurred to restore an existing asset to its previous condition, and these are often fully deductible. You know better than us the condition of your gear, and how much you have already spent on it in the past, so perhaps the upgrade is justified, but new isn’t always better.

The government introduced the Investment Boost in May 2025 as a tax incentive. It allows businesses to claim 20% upfront of the cost of new (keyword!) capital items. However, to claim the 20%, you still need to pay 100% of the cost – the $100,000 investment doesn’t suddenly cost you $80,000 because of the Investment Boost.

In addition to this, the item is still recorded on your fixed asset schedule at $100,000.  The investment boost simply accelerates the depreciation you’re able to claim - the original cost doesn’t change, nor does the total amount of depreciation you will claim over the life of the asset. This is something to keep in mind, as the tax benefit you’ve received up front may affect the tax treatment when the item is eventually sold.

It’s easy to focus on the new purchase, but what happens to the item you’re replacing? Are you keeping it, trading it in, selling it? All these options can have different tax consequences, so make sure you’ve considered both sides of the transaction before you make your final decision.

I can appreciate the lure of the Investment Boost, but it shouldn’t drive your decision. Repairing your existing items remains a valid option, and generally these costs are 100% deductible. The ideal scenario is that you had budgeted to complete upgrades anyway, so the incentive only strengthens the case - but don’t just buy new items with the intention of saving tax. The best investments should first make sense for your business, and then make sense for tax.

Content in this article is general and does not constitute advice – please get in touch if you'd like to discuss your specific circumstances.

Erin Neale, Associate at Brown Glassford & Co Limited.