Dunedin's many software developers will be among those to benefit from a change in tax law this week that allows them to claim tax deductions on failed software developments.
Deloitte Dunedin tax partner Peter Truman said failed computer software development covered the situation where a person developed a program but before it was completed, abandoned it because it did not work as intended or had been superseded by another approach.
Computer software that was successfully completed became depreciable with the cost being able to be written off over time, he said.
Earlier this year, Inland Revenue expressed the view that such expenditure was unlikely to ever be deductible and was likely to be "black hole" expenditure - expenditure that was neither deductible immediately or over time through the depreciation regime.
In response to several approaches to Inland Revenue officials and Revenue Minister Peter Dunne, Mr Dunne announced earlier this week that retrospective legislation would be introduced providing for a deduction for expenditure on failed computer software developments, Mr Truman said.
Mr Dunne said that failing to allow the deductions inhibited productivity and innovation.
"Essentially, the Government wants business to help drive the economy forward and this move is about clearing obstacles to them doing that.
"Software development can represent a significant investment for any business, and not allowing an immediate deduction if a project fails simply discourages businesses from undertaking the kind of innovation that could lead to increased growth and productivity."
Mr Dunne said the change would be in tax legislation due to be introduced in September and would be backdated to ensure that expenditure incurred this year was deductible.
New Zealand Computer Society chief executive Paul Matthews welcomed the news that the matter was being resolved quickly.
