Go boldly! Where no tax-break has been before..

Date: 5th June 2013

The budget will provide tax relief for six areas of so-called ‘black hole’ business expenditure.  This will make some items tax deductible where there have previously been no tax breaks at all.  The changes will reduce compliance costs for some businesses and may stimulate business activity in those areas.
For companies, there’ll be some relief, although it’s a fine line as to what is and is not deductible:

  • All direct costs associated with the payment of dividends by a company to its shareholders will be deductible
  • Annual fees for listing on a stock exchange will be deductible.  However, the initial costs of listing on a stock exchange and the costs of additional share issues remain non-deductible
  • Annual shareholder-meeting costs are immediately tax deductible, while special shareholder meeting costs remain non-deductible

For developers and, indirectly, those businesses in or allied to the construction industry, the changes around resource consents may bring an upswing in activity:

  • Previously expenses incurred with resource consent applications have only been deductible when the application has been completed and lodged.  From 2014, the expenses will be deductible even where the application has been abandoned prior to lodgement.  The deduction can be claimed in the income year in which the taxpayer decides to not proceed with seeking the resource consent
  • Fixed-life resource consents granted under the Resource Management Act 1991 to do something that otherwise would contravene s 15A (dumping of waste in coastal areas) or s 15B (discharging hazardous substances from ships and offshore installations) of that Act will be made depreciable for tax purposes

Businesses with assets that include intellectual property may find the path for research and development a bit smoother:

  • Capitalised expenditure on legal and administrative fees that would have been part of the depreciable cost base of a patent application or plant variety rights, but where no depreciable asset is recognised for tax purposes, will now be tax deductible. The deduction can be claimed in the income year in which the taxpayer decides to no longer proceed with seeking the registration of the applicable intellectual property right

It has also been announced that small start-up companies with tax losses from Research and Development expenditure may be able to get these refunded in cash.  Further details are expected in June.

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