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Budget provides tax relief to certain ‘black hole’ expenditure

Long overdue but still welcome

It is refreshing to see the Government move to deal with a number of categories of much-maligned “black hole expenditure,” says Deloitte CEO Thomas Pippos.  

The term is used to describe a business expense for which no tax deduction is available, and has been a sore point for many businesses over time in various fact situations. The measures announced today propose to remove black hole expenditure in certain instances including:

  • Immediate deductibility for capitalised expenditure on legal and administrative fees incurred in applying for a patent or plant variety rights, but where no depreciable asset is recognised for tax purposes.
  • Making certain fixed-life resource consents granted under the Resource Management Act 1991 depreciable for tax purposes.
  • Making expenditure immediately tax deductible if it is incurred on resource consent applications that are abandoned, rather than requiring the application to be lodged in order for the expenditure to be tax deductible.
  • Immediate deductibility for all direct costs associated with the payment of dividends by a company to shareholders.
  • Immediate deductibility of annual fees for listing on a stock exchange, and clarification that the initial costs of listing and costs of additional share issues are not tax deductible.
  • Specifying that annual shareholder-meeting costs are immediately tax deductible, and special shareholder meeting costs are non-deductible.

“The amount at stake is often immaterial in any global sense with the irritant and equity factor far exceeding the dollar amounts involved,” says Mr Pippos.

“Possibly the most positive outcome is that it evidences that officials have constructively listened to the concerns of the private sector and removed a number of irritants and anomalies in the current rules which reinforces the importance of constructive dialog in the development of tax policy,” concludes Mr Pippos.  

 

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Name:
Matt Huntington
Company:
Deloitte New Zealand
Job Title:
Communications Manager
Phone:
04 470 3771
Email
mhuntington@deloitte.co.nz
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