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Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 40B: Expenditure in unsuccessful development of software

You could also call this:

“Money back for unfinished business software development”

If you’re trying to make software for your business but you stop before it’s finished, you might be able to get some money back through your taxes. This applies when the software you were making would have been something that loses value over time (which is called depreciable property) if you had finished it.

You can claim back the money you spent on trying to make the software, as long as you haven’t already claimed it somewhere else on your tax return or under a different law. You can only claim this money back in the tax year when you decide to stop making the software.

Even though this is about getting money back for something you tried to make (which is usually not allowed), it’s okay in this case. But you still need to follow the other rules about what you can and can’t claim on your taxes.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM4883323.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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Part D Deductions
Specific rules for expenditure types

DB 40BExpenditure in unsuccessful development of software

  1. This section applies when a person incurs expenditure in the development of software for use in the person's business if—

  2. the development of the software is abandoned when the copyright in the software is not depreciable property of the person; and
    1. the copyright in the software would have been depreciable property of the person if the development had been completed.

      1. The person is allowed a deduction for expenditure incurred in the development of the software to the extent to which no deduction has been allowed for the expenditure under another provision of this Act or under another Act.

      2. The deduction is allocated to the income year in which the development of the software is abandoned.

      3. This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.

      Notes
      • Section DB 40B: inserted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 21(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
      • Section DB 40B(1)(a): amended (with effect on 1 April 2011 and applying for the 2011–12 and later income years), on , by section 99(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
      • Section DB 40B(1)(b): amended (with effect on 1 April 2011 and applying for the 2011–12 and later income years), on , by section 99(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).