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The government is to proceed with new a regime allowing start-up companies to cash out all or part of their tax losses from research and development expenditure, and to write off “black hole” R&D spending on unsuccessful projects.
The announcements are expected to cost the government around $58.1 million over four years and follow a consultation process in which both initiatives were canvassed with the tax and business communities.
“R&D-intensive start-up companies will have early access to all or part their tax losses in the form of a cash receipt, rather than carrying those losses forward,” said the Science and Innovation and Revenue Ministers, Steven Joyce and Todd McClay in today’s announcements.
In addition, “all capitalised costs on depreciable, intangible assets (for example, patents) will be deductible over time” instead of allowing only the legal and administrative costs of registering the asset to be depreciable.
A one-off deduction will also be allowed for “black hole” expenditure on intangible assets created in unsuccessful projects.
This change would “ensure businesses are not discouraged from undertaking R&D expenditure by start-up companies will assist in reducing constraints on their cashflow and capital.”