While the budget dominated most of the news over the last week the rest of the world kept turning. Over the past week the Inland Revenue Department released Interpretation Statement 16/01 (IS 16/01) setting out the Commissioner’s position in relation to software acquired for business.

Just like other capital assets a decision then needs to be made about further costs in relation to the software with maintenance costs being deductible and upgrades requiring capitalisation.

One benefit in relation to software is the high depreciation rates applicable. Generally software is depreciated at 50% under the diminishing value method  or 40% under the straight line method meaning that even when capitalised a full deduction can be achieve within two and a half years if the straight line method is used.

Interestingly in making the statement the Commissioner has recognised that references are made to IS 08/02 concerning feasibility expenditure and the Commissioner has acknowledged the impact the CIR v Trustpower Limited decision may have on that statement. The Commissioner’s current position is that until the litigation is resolved the Commissioner will apply her current position on feasibility expenditure.