New legislation introduced to Parliament today will support growth and assist businesses on the road to economic recovery, said Revenue Minister Stuart Nash.
“The Taxation (Annual Rates for 2020-21, Feasibility Expenditure, and Remedial Matters) Bill proposes that businesses can get tax deductions for ‘feasibility expenditure’ on new investments,” said Mr Nash.
“We’ve already introduced R&D tax credits to support investment in research and development. This new proposal is the next step in giving businesses the confidence to invest in growth – even when some of their ideas don’t work out.
“Business owners tell us that costs incurred in exploring a new asset or business model are often not tax deductible and this can deter them from investing in growth and innovation. The new legislation addresses these barriers to help unlock investment.
“Businesses would be able to claim a deduction spread over five years for feasibility expenditure incurred in investigating a new asset, process or business model even if it is subsequently abandoned.
“To keep things simple and reduce compliance costs, particularly for small and medium businesses, qualifying expenditure of less than $10,000 would be immediately deductible in the current income year. This helps with business cash flow.
“We are supporting Kiwi companies to innovate and grow by making it easier to invest in new assets and business models. Current rules can be problematic. We are making the system fairer and keeping compliance costs low for businesses,” said Mr Nash.
The bill also contains the following proposals that have previously been subject to public consultation:
- New rules governing purchase price allocation, where parties to the sale of two or more assets with different tax treatments allocate the sales price between the assets for tax purposes.
- New rules from the ongoing review of the taxation of land, particularly in relation to investment property and speculators. The changes will improve efficiency of the tax system and encourage productive use of land and properties.
- Allowing dairy and beef cattle farmers who have unexpected taxable income as a result of their herd being culled (in pursuit of eradicating Mycoplasma bovis from New Zealand), to evenly spread that income forward over six years.
“This bill promotes growth while maintaining the integrity of the tax system.
“Restoring our economy requires a broad-base low-rate tax system with strong integrity. The fairness and integrity of our system means rules work as intended and everyone pays their fair share, which allows the government to continue providing vital services, functions and support.
“The changes put us in a stronger position for economic recovery,” said Mr Nash.
More information is available here: https://taxpolicy.ird.govt.nz/news/2020-06-04-omnibus-tax-bill-introduced