Skip to main content
Inland Revenue

Tax Policy

PUBLISHED 7 November 2013

Govt seeks feedback on black hole R&D expenditure tax proposals

Feedback is sought on proposals to resolve problems around the tax deductibility of certain types of business-related R&D expenditure. For more information see the media statement and the discussion document, Black hole R&D expenditure. Submissions close on 17 December.

Hon Steven Joyce 
Minister of Science & Innovation

Hon Todd McClay 
Minister of Revenue

Media statement

7 Novemberr 2013

Govt consults on R&D black hole expenditure tax proposals

Science and Innovation Minister Steven Joyce and Revenue Minister Todd McClay today released a Government consultation document, Black hole R&D expenditure, which seeks feedback on proposals to resolve problems around the tax deductibility of certain types of business-related research and development expenditure.

“It is our most innovative companies that are leading New Zealand’s economic recovery and competing successfully internationally. However the current tax rules can discourage businesses from investing in vital research and development because they may not be able to claim a deduction for all their expenditure,” Mr Joyce says.

“Black hole expenditure refers to costs a business incurs for which no tax deduction is available. This can result in investors putting their money into less productive areas of the economy because of a perceived tax disadvantage with some research and development ventures.”

“While there are many reasons for choosing one investment option over another, the Government wants to minimise the impact that tax has on these investment decisions,” Mr McClay says.

The Government announced a set of black hole expenditure proposals as part of Budget 2013, but Mr McClay said the current proposals “go beyond those initial proposals.” 

Feedback is sought on the following:

  • ensuring that capitalised development expenditure that relates to certain depreciable assets is able to be depreciated over the legal life of the asset to which it relates;
  • clarifying that capitalised expenditure incurred by a taxpayer in the successful development of software for use in their own business is depreciable; and
  • allowing an immediate tax deduction for capitalised development expenditure that gives rise to an unsuccessful asset – providing certain criteria are met.

“For a small economy such as ours, New Zealand has a proud history of innovation. Removing known tax impediments that can get in the way of that innovation is one way of encouraging businesses to continue growing and contributing to the economy,” the Ministers say.

The consultation document, Black hole R&D expenditure, can be found at

Media contact: Anna Lillis 021 683 282 (Steven Joyce 
Rob Eaddy 0274 596 200 (Todd McClay)