Failed Software Projects To Be Tax Deductible

June 22, 2011 New Zealand Taxation

Tax deductionsThe New Zealand government has announced a change to the national tax system, aimed at encouraging local companies to engage in innovative software development projects.

To the appreciation and approval of the New Zealand software development industry, the New Zealand Revenue Minister Peter Dunne has confirmed in a press conference held in Wellington on June 20th that the Inland Revenue Department’s (IRD) decision to allow deductions for failed software development projects.

In April this year the IRD issued a notice, reversing a decision made in 1993 which allowed for a deduction to be made on a failed software development project. The IRD claimed that expenses towards the development of software were a contributor to an eventual software asset. However, if the program or system is never completed, there is no final asset, and no deductions can be claimed. The move was seen as significant handicap to innovative project development, and a deterrent for the nation’s high-tech sector.

Commenting on the clarification Peter Dunne said, “Essentially the government wants business to help drive the economy forward, and this move is about clearing obstacles to them doing that.”

Paul Matthews, CEO of the NZ Computer Society, applauded the change, saying, “The Society sees this as a very important step in ensuring New Zealand’s economy continues to be strengthened on the back of innovation and investment in technology.”

Photo by static416