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Inland Revenue

Tax Policy

PUBLISHED 23 September 2019

Tax initiatives announced to support businesses

The Government has announced its intention to proceed with two measures recommended by the Tax Working Group:

  • allowing a deduction for feasibility expenditure for businesses; and
  • relaxing the loss continuity rules.

Revenue Minister Stuart Nash says that early next year he intends to include the proposal on feasibility expenditure in a taxation bill and that public consultation would take place on loss continuity rules.

For more information see the media statement from the Ministers of Finance and Revenue.

Hon Grant Robertson
Minister of Finance

Hon Stuart Nash
Minister of Revenue
Minister for Small Business

Media statement

23 September 2019

Business tax changes back Kiwi companies to innovate and grow

  • Government removes key barrier to business innovation with new tax incentive
  • New rules backing start-ups to get off the ground and attract investment
  • Economic Plan focusses on a more productive, sustainable, inclusive economy

The Coalition Government is backing Kiwi companies to innovate and grow by making it easier to invest in new assets and business models, and giving start-ups a better shot at success.

As part of the release of the Government’s Economic Plan, Finance Minister Grant Robertson and Minister for Small Business and Revenue Stuart Nash today announced the removal of two barriers to expansion faced by businesses.

“At present, the costs associated with exploring whether to invest in a new asset or business model are often not deductible for tax purposes. Business owners tell us this can deter them from spending money looking at better ways of doing things,” Grant Robertson says.

“We’re changing this so businesses can deduct ‘feasibility expenditure’ from their tax bills, including for projects that don’t end up going ahead.

“This is about creating an environment where businesses are encouraged to innovate and become more productive – even if some of these ideas don’t work out,” Grant Robertson says.

Stuart Nash says the current rules are particularly problematic for infrastructure companies, meaning this change will help unlock investment.

“To keep it simple and reduce compliance costs, particularly for small and medium businesses, we’re proposing that qualifying expenditure totalling less than $10,000 be deductible immediately. Deductions will be able to be spread over five years.

“Public consultation has already been held on this and feedback has been supportive, indicating the proposal could have great benefits to the economy.”

This measure will be included in a taxation bill to be introduced into Parliament early next year, meaning the change can kick in from the start of the next tax year.

The second proposal announced today will change New Zealand’s ‘loss continuity rules’ to make it easier for start-ups to attract investment and get off the ground.

As the rules currently stand, a firm that suffers a loss one year can use that loss to reduce its taxable income in the future, but the rules do not work well for start-ups who are trying to attract new investment.

As these start-ups attract new investment they often breach the threshold under which they can continue to use these losses.

“Business and tax experts will be consulted on the proposals later this year, along with a review of the existing R&D tax loss cash out rules. This is the normal process for tax policy changes,” Stuart Nash says.

The changes announced today as part of the Government’s Economic Plan build on initiatives already announced. These include a $1 billion investment for R&D tax incentives, record transport infrastructure investment, boosts to apprenticeships and trades training, and changes to immigration settings to make it easier for businesses to access the workers they need.