News

Income Tax Treatment of Software Development Expenditure – Consultation, Inland Revenue

Earlier in 2016 Inland Revenue sought feedback from Industry groups such as NZRise on their upcoming proposal to revisit the taxation treatment of software developed for the purpose of commercial exploitation – now issued for consultation.

NZRise members are welcome to submit to Inland Revenue directly or join the membership discussion and contribute to our collective submission which will be put forward in both written and verbal form. There is a link below to the IR consultation page. This issue is titled “IRRUPIP10: Income tax treatment of software development expenditure”.

This issues paper has been released to initiate discussion about the appropriate income tax treatment of expenditure incurred to develop software for commercial exploitation. It considers the Commissioner’s current approach which treats software development expenditure as the cost of producing trading stock (published in the appendix to Tax Information Bulletin Vol 4, No 10 (May 1993)). The initial view expressed in this paper is that the current approach may not always be the appropriate treatment, depending on how the software is to be commercially exploited.

http://www.ird.govt.nz/public-consultation/current/public-consultation-draft-items-index.html

NZRise members consider this to be an important matter for our industry noting during the initial discussions with IR the current disconnection between Callaghan Innovation and their own positions on the treatment of Research and Development activity, our concern that many new businesses find the ability to expense R&D advantageous for cashflow purposes, our concerns as to the application of this tax treatment with regards to OpenSource software – among others noted. These can be reviewed by members on the relevant thread internally.

Please take a look and consider the implications for your own business. Victoria MacLennan

Leave a Reply

Your email address will not be published. Required fields are marked *