The Inland Revenue Department last provided guidance to software developers around taxation in 1993. Unsurprisingly, technology has expanded in unforeseen ways since then and in recognition of this, the IRD has released an issues paper relating to the taxation of expenditure in software development. It is now seeking submissions from the industry as to how to address such difficult concepts as:
- the depreciation regime for software;
- how to address research and development costs; and
- how to apply trading stock rules where software is developed for sale or licence.
The guidance that results out of this call for submissions could affect a software development company's tax position for years to come, so have your say before 25 August.
The evolution and revolution of software development as an industry will continue and probably speed up. New Zealand heralds its opportunity to finally export to a world market with a product that isn’t limited by shipping logistics. The industry already has many issues around attracting and retaining talent while trying to promote increased technology education into schools. The increase of innovation hubs and generous technology grants are all great progress for the future. Inland Revenue needs to also modernise its policy settings and approach. Rather than providing taxpayers with a complex compliance challenge, a blank canvas approach could help uncover a specific and generous regime where software developers of all types are supported to build New Zealand 3.0.