Income tax treatment of unsuccessful software development costs announcement
Earlier this year Inland Revenue advised that it had withdrawn a statement that the cost of unsuccessful software development can be immediately deducted. We have raised this with Inland Revenue’s Policy Advice Division. Earlier this year Inland Revenue advised that it had withdrawn a statement made in TIB 4.10 (May 1993) that the cost of unsuccessful software development can be immediately deducted. Together with other taxpayers and stakeholders in the tax system, the Institute raised this with Inland Revenue’s Policy Advice Division. Our concern was about the appropriateness of withdrawing this statement when it did, and whether these costs should be deductible as a matter of policy.
On 22 June Revenue Minister Peter Dunne announced that businesses will be able to claim tax deductions on failed software developments. Mr Dunne said the Government recognises that New Zealand needs more investment in productive sectors, and access to and development of cutting edge software will increasingly be a key component of remaining competitive. The Institute’s tax director, Craig Macalister was critical of Inland Revenue withdrawing the statement without consultation, and applauds the Minister for restoring deductibility and creating certainty by backdating the amendment.
View the Minister’s media statement
01 July 2011