8 June, 2007

They've been a long time coming but business tax reforms were announced in Budget 2007.

The Government announced that a new Research & Development Tax Credit will be introduced from the 2008/09 tax year, to encourage businesses to undertake more R&D activities in New Zealand. The credit is set to be 15% of allowable expenditure, where the R&D activities are systematic, investigative, experimental and conducted predominantly in New Zealand.

Further good news for companies is the reduction of the company tax rate, to be applied as of 1st April 2008, lowering the current rate of 33% down to 30%. This will allow companies to use more of their profits for investment or dispersion to shareholders, though a 3% reduction is unlikely to have a major effect on how businesses are run.

Further details can be read in the Government's document, Budget 2007 Business Tax Reform Package Backgrounders and FAQs.