Guide to New Zealand budgeting practices

Capital allowance

The capital allowance is the net new “one-off” funding the Government intends to allocate to capital projects in the Budget. Like operating allowances, capital allowances are a net concept, meaning that capital savings offset spending. Capital investment requirements can be large, uneven and sometimes unexpected. In some Budgets, the Government's new capital expenditure will be greater than the set capital allowance and in others it will be less. This flexibility makes the capital allowances a looser constraint than the operating allowances, and multi-year trade-offs can still be made. The capital allowance is an indication of future capital expenditure, but the ultimate financial constraint is the fiscal strategy. Capital expenditure is also constrained by the operating allowances, as capital projects typically have operating costs such as depreciation and maintenance.

Capital Allowances