The Government’s latest Budget has addressed six areas of business expenditure nicknamed ‘black holes’. Tax will now be deductible from items which previously did not qualify and may kick start business activity because of a reduction in costs of compliance for certain businesses. Tax changes as follows…
Companies will have some tax relief but what is, and what is not, tax deductible is a fine line.
- Dividend payments by a company – any direct costs attributable to the payment of Shareholder dividends will be tax deductible.
- The costs of listing initially on a stock exchange or expenses incurred for additional share issues are still not tax deductible but annual listing fees will be.
- The yearly shareholder meeting costs will be tax deductible immediately but special meeting costs will still not be deductible.
Land and Property Developers and allied businesses in the building industry have been given a boost with changes to resource consents.
- Currently the costs incurred when applying for resource consents are only deductible once an application is finalised and lodged. As from 2014 these costs will still be deductible even if the application is not completed or lodged. This deduction can be made in the tax year the taxpayer abandons the resource consent application.
- The Resource Management Act 1991 granted some fixed-life consents which allowed contravention of s 15A (coastal area waste dumping) or s 15B (discharge of hazardous materials from offshore installations and vessels), these consents will become a depreciable item for tax purposes.
Research and Development businesses which have intellectual property assets may be helped by the following:
- Administrative and legal fees are currently included in the depreciable costing of plant variety rights or patent applications as capitalised expenditure. However, if no depreciable asset has resulted for tax purposes these expenses will now be tax deductible. As above this deduction is claimable in the year the taxpayer decides to no longer pursue registration of patent or intellectual property right.
Start-up companies who experience losses due to research and development expenses may be able to get cash refunds – more information on this should be announced in June 2013.