The government is offering startups that invest heavily in R&D the ability to cash out all or part of their tax losses on that area of spending, under this year's budget.
The new measure gives these companies access to losses with a cash receipt so the losses aren't carried forward.
Capitalised costs on assets like patents that are depreciable and intangible will be deductible over time, the government says. At the moment only legal and admin costs associated with registration are treated as depreciable.
The government is also tackling black hole spend on R&D projects that turn out to be successful, providing a one off tax deduction for capitalised expenditure on assets that are written off. Black hole expenditure is business costs that aren't tax deductible and can't be depreciated.
The government estimates the two tax measures will return $58.1 million in net tax to innovative companies over the next four years.
“The government is targeting an increase in business R&D to one per cent of GDP to help build long-term growth and prosperity for New Zealand,” science and innovation minister Steven Joyce says.
“As part of that we want to reduce tax hurdles that discourage R&D investment by innovative companies.”
Revenue minister Todd McClay says the measures will reduce startups' cashflow and capital constraints and make sure businesses aren't discouraged from R&D because of how their spending is taxed.
The government released a discussion paper on black hole R&D expenditure last November.
“For a small economy such as ours, New Zealand has a proud history of innovation. Removing known tax impediments that can get in the way of that innovation is one way of encouraging businesses to continue growing and contributing to the economy,” the ministers said at the time.
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