Officials are seeking feedback to gain a better understanding of whether the current tax treatment of both software development expenditure and software as a service (SaaS) customisation and configuration costs leads to the correct outcomes.

CA ANZ supports the review and agrees that the current tax settings and Inland Revenue guidance require modernisation to reflect the way software is developed, implemented, licensed, and maintained today. The legislative framework underpinning software expenditure was built for an earlier technological era and no longer accommodates contemporary development methodologies, cloud-based software delivery, or the diverse ways businesses, particularly small and medium-sized enterprises (SMEs), invest in digital capability. The result is a system that is difficult to apply in practice, imposes excessive compliance costs, and can produce outcomes that are inconsistent with the economic substance of software activity.