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Inland Revenue

Tax Policy

PUBLISHED 22 June 2011

Software development costs

The Minister of Revenue today issued a statement announcing his decision to allow a deduction for the development costs of unsuccessful software. See the media statement for more information.

Hon Peter Dunne
Minister of Revenue

Media statement

Dunne: failed software developments to be tax deductible

Revenue Minister Peter Dunne today announced that businesses will be able to claim tax deductions on failed software developments because to not do so would inhibit productivity and innovation.

"Essentially the Government wants business to help drive the economy forward, and this move is about clearing obstacles to them doing that.

"Software development can represent a significant investment for any business, and not allowing an immediate deduction if a project fails simply discourages businesses from undertaking the kind of innovation that could lead to increased growth and productivity.

"The Government recognises that if such expenditure is not tax deductible, it is effectively an inhibitor to business taking such steps.

"We do not want the fear of the undue financial cost of a software project failure to stop growth and innovation," he said.

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.

"A good tax system is one that is fair and does not distort investment decisions," he said.

Mr Dunne said that the amendment confirming that expenditure on failed software is deductible will be in tax legislation due to be introduced in September and will be backdated to ensure that expenditure incurred this year is deductible.


Mark Stewart | Press Secretary | Office of Hon Peter Dunne
Cell +64 21 243 6985