Business time (June 2017)
The Government’s Business Growth Agenda invests $1b over the next four years. Our economy and population have already been growing strongly. Over the next four years, this growth might be slowed down by the inflation that tends to follow economic growth as well as factors beyond our shores if growth rates slow in the trade regions that are so important to us.
The Agenda supports continued growth by investing in innovation, developing our skilled workforce and paving the way – literally – with infrastructure spending on roading, transport and communication networks. This includes investment in infrastructure to support tourism, recognising the pressure increased visitor numbers have put on existing facilities but also acknowledging the corresponding increases to revenue.
Innovation
The Business Growth Agenda aims to nurture innovation in New Zealand businesses and attract research and development from overseas.
The Agenda extends the second round of funding to the Government’s Innovative New Zealand programme. Some of this is earmarked for strategic science investments, and research and development grants. The Strategic Innovation Partnerships Programme has been expanded with a goal to attract 10 multinational companies to undertake R&D activity in New Zealand by 2020. Economic development funding will be spread across various government initiatives.
Feasibility
So-called black hole expenditure is back on the table for discussion. This is the money businesses spend on trying to get new ideas to fly. Early stage spending is often not tax deductible and it’s a deterrent to business innovation not to be able to recover funds spent on testing feasibility, if it turns out the idea doesn’t work. Hence a perception that the business is throwing its money down a black hole.
Businesses can be hog-tied by the capital limitation: if it’s capital expenditure it’s not tax deductible, but in the early days of testing out whether projects will work and are commercially viable it can be hard to be clear on what’s capital expense and what’s not.
The Government discussion document, ‘Black hole and feasibility expenditure’ proposes measures to ensure the tax treatment of feasibility expenditure is clearer, and that it won’t receive black hole treatment. Submissions on the proposals close on 6 July 2017. If you would like to discuss how this could affect your business, please call us.