New Zealand Lining Up More Tax Relief For Fledgling Firms

new-zealand-lining-up-more-tax-relief-for-fledgling-firms

Posted on 10-01-2019

The New Zealand Government has announced that it will adopt two tax incentives proposed by the Tax Working Group: a deduction for “feasibility expenditure” for businesses, and relaxed loss continuity rules.

Finance Minister Grant Robertson said: “At present, the costs associated with exploring whether to invest in a new asset or business model are often not deductible for tax purposes. Business owners tell us this can deter them from spending money looking at better ways of doing things. We’re changing this so businesses can deduct ‘feasibility expenditure’ from their tax bills, including for projects that don’t end up going ahead.”

“This is about creating an environment where businesses are encouraged to innovate and become more productive – even if some of these ideas don’t work out.”

Under the proposals, qualifying expenditure totalling less than NZD10,000 will be deductible immediately. Deductions will be able to be spread over five years.

On the reform of the loss continuity rules, the Government noted that, as the rules currently stand, a firm that suffers a loss one year can use that loss to reduce its taxable income in the future. However, changes will be made to respond to concerns that the rules do not work well for start-ups who are trying to attract new investment.

As these start-ups attract new investment they often breach the threshold under which they can continue to use these losses, the Government said.

“Business and tax experts will be consulted on the proposals later this year, along with a review of the existing research and development tax loss cash out rules,” Revenue Minister Stuart Nash said.

The two measures will be included in draft legislation early next year, Nash said, with the deduction for feasibility expenditure expected to be in place by next tax year.

The New Zealand Government has announced that it will adopt two tax incentives proposed by the Tax Working Group: a deduction for “feasibility expenditure” for businesses, and relaxed loss continuity rules.

Finance Minister Grant Robertson said: “At present, the costs associated with exploring whether to invest in a new asset or business model are often not deductible for tax purposes. Business owners tell us this can deter them from spending money looking at better ways of doing things. We’re changing this so businesses can deduct ‘feasibility expenditure’ from their tax bills, including for projects that don’t end up going ahead.”

“This is about creating an environment where businesses are encouraged to innovate and become more productive – even if some of these ideas don’t work out.”

Under the proposals, qualifying expenditure totalling less than NZD10,000 will be deductible immediately. Deductions will be able to be spread over five years.

On the reform of the loss continuity rules, the Government noted that, as the rules currently stand, a firm that suffers a loss one year can use that loss to reduce its taxable income in the future. However, changes will be made to respond to concerns that the rules do not work well for start-ups who are trying to attract new investment.

As these start-ups attract new investment they often breach the threshold under which they can continue to use these losses, the Government said.

“Business and tax experts will be consulted on the proposals later this year, along with a review of the existing research and development tax loss cash out rules,” Revenue Minister Stuart Nash said.

The two measures will be included in draft legislation early next year, Nash said, with the deduction for feasibility expenditure expected to be in place by next tax year.