Failed software projects to be tax deductible - Dunne
Computer Society successfully fights back against IRD re-interpretation.
Computer Society successfully fights back against IRD re-interpretation.
Business will be able to claim tax deductions on failed software developments because not allowing them to do so inhibits productivity and innovation, Revenue Minister Peter Dunne says.
"Essentially the Government wants business to help drive the economy forward and this move is about clearing obstacles to them doing that," he said today.
"Software development can represent a significant investment for any business, and not allowing an immediate deduction if a project fails simply discourages businesses from undertaking the kind of innovation that could lead to increased growth and productivity."
Mr Dunne said the change would be in tax legislation due to be introduced in September and would be backdated to ensure that expenditure incurred this year was deductible.
The NZ Computer Society welcomed the news. Chief Executive Paul Matthews said this afternoon, “The NZCS recently highlighted the IT sector’s very serious concerns in relation to the recent announcement that failed software projects could lose their tax deductibility. We strongly congratulate the Minister and IRD for acting on this so promptly, thereby providing certainty to the sector and New Zealand”.
The Inland Revenue Department recently released a determination that re-interpreted the deductibility of failed software projects and found that in some circumstances software projects that failed could never be treated as a business expense – either in the year they failed or in subsequent years through depreciation.
“If this determination remained it would have had a very significant effect on the willingness of companies to invest in software and especially in relation to smaller local software providers”, Mr Matthews said.
“This is not a minor matter – this decision has the effect of safeguarding investment in software which will see our economy grow through increased innovation, efficiency and productivity”,Mr Matthews said. “It’s excellent that the Minister has heard the concerns of the technology and business sectors”.
Matthews also welcomed the news that the issue would be resolved promptly and backdated to the date the previous determination took effect, thereby providing certainty to the business community.
“This announcement sends a loud and clear message that investment in software and innovation is a priority for New Zealand”, Mr Matthews said.