The Government will make sweeping changes to New Zealand business tax rules by creating new tax incentives scheme for small businesses and startups.
This comes as part of the Government’s economic plan, unveiled by Finance Minister Grant Robertson this morning.
At the moment, the costs of looking into a potential business investment – such as buying a new asset or changing the way a company does business – is not tax deductible.
This stops many entrepreneurs from spending money on improving the way they do business, Robertson said.
“We’re changing this so businesses can deduct ‘feasibility expenditure’ from their tax bills, including for projects that don’t end up going ahead.”
In other words, if a business invests in new product-enhancing technology but that investment does not work out, that business owner will now be able to claim a tax deduction on that cost.
Under the current rules, there is no allowance for such a deduction which, says Robertson, has meant less innovation in the market.
Robertson told Newstalk ZB the tax plan would cost the Government $80 million to implement.
“But we think the pay-off from this is actually the innovations we’re going to get from businesses.”
Revenue Minister Stuart Nash said the rules in place at the moment were particularly problematic for infrastructure companies.