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R&D tax changes for SMEs & Bodies Corporate GST rules

R&D tax changes for SMEs & Bodies Corporate GST

KPMG welcomes R&D tax changes for SMEs, and GST rules for Bodies Corporate


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KPMG says key changes in the Tax Bill released yesterday will be welcomed by business.

The key proposal in the Tax Bill is to allow start-up businesses undertaking R&D to cash up their tax losses.

"The proposal, announced in last year’s Budget, will be welcomed by start-ups in the high-tech sectors, as it will provide some additional cash flow when the business needs it most", says Paul McPadden, National Managing Partner of KPMG Private Enterprise. However, he advises caution as the refunds will be capped and the business will also need to meet certain other requirements to qualify for relief.

"One of the challenges for business is understanding the different types of Government assistance available", says McPadden. He says businesses need to do their homework as the Government has committed significant funding for R&D and innovation over the last few years, through grants and other means, but only a fraction of this is currently being accessed.

"One of the first steps should be talking to your business advisor. There is also a role for the Government agencies responsible for this funding to better link with business and their advisors", according to McPadden.

"The Government has also listened to concerns about the GST treatment of bodies corporate and introduced proposals which are more workable", says Peter Scott, KPMG GST Partner.

The concern is whether fees for services provided to members (such as building maintenance, insurance, and security) are subject to GST and, correspondingly, whether a body corporate can claim back the GST on costs incurred. IRD released a view last year saying they were, which caused concern as some bodies corporate were claiming and paying GST while others were not. In response the Government consulted on a possible legislative change in June 2014.

"The result of that consultation, the proposal in the Tax Bill, clarifies that previous GST positions do not have to be revisited", says Scott.

That is, if a body corporate has previously registered for GST it can continue to pay (and claim back) GST, while those that have not can either remain unregistered or GST register with accompanying tax obligations.

"This is a considerable improvement over the Government’s original proposal, which was to treat bodies corporate members’ fees as GST exempt in all cases and deny GST claims on bodies corporate expenditure”, says Scott. “That would have resulted in considerable compliance costs, including having to repay GST refunds and/or claim back GST already paid. We therefore welcome the change of approach."

For further information, contact:

Paul McPadden
National Managing Partner for Private Enterprise
+64 9 367 5919 

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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