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Category: 3. Business

  • The 2025 Asia-Pacific Value Creators Collection

    Across the Asia-Pacific region, growth has long been the headline story. But as economies and capital markets mature, the area is entering a new phase defined not only by expansion but also by disciplined, sustained value creation. From India’s market-leading returns to Japan’s new investor engagement models, Asia-Pacific companies are redefining what it means to translate growth into shareholder value. The emerging lessons offer guidance for companies worldwide.

    A Mosaic of Progress

    No two Asia-Pacific markets are alike, yet each is charting a path toward long-term value creation in a way that is grounded in distinctive structural and strategic choices.

    India has set the pace globally, delivering an average annual total shareholder return (TSR) of more than 15% over the past decade—the highest among major economies. Its outperformance rests on a solid foundation: simultaneous gains in revenue, profitability, and valuation multiples. India’s family-owned companies have been consistent outperformers, using long-term thinking, prudent diversification, and disciplined governance to compound value over time. As its IPO market matures and investor confidence deepens, India is proving that strong growth can coexist with high-quality returns.

    Japan is demonstrating the power of trust and communication in driving value. With stock markets reaching record highs and an average annual TSR of 13% from 2020 through 2024, leading Japanese companies are translating operational excellence into stronger investor engagement. The country’s hallmark Medium-Term Management Plans are evolving into true equity stories—strategic narratives that articulate not just what companies plan to achieve but why investors should choose them. The most successful firms are those that blend bold ambition with transparency, scenario-based planning, and capital-allocation discipline.

    China shows strong potential for transformation. Although it is hard to generalize, companies in Mainland China, Hong Kong, and Taiwan tend to lag those elsewhere in TSR. As leading companies professionalize governance and open to international investors, TSR has emerged as a strategic compass—a metric and mindset linking management actions to shareholder outcomes. The best performers are aligning business fundamentals, capital strategies, and investor communications. For those firms, TSR is an essential management tool, offering benefits ranging from strategic decision making to employee retention.

    Australia is a model of consistency and discipline. Over the past two decades, the Australian Stock Exchange has delivered an 8% annualized TSR, remaining steady and resilient through shocks ranging from the global financial crisis to COVID-19. Beyond the traditionally strong sectors of metals and mining and financial institutions, standout value has also come from the tech, medtech and pharma, and consumer goods sectors. The most successful companies have exhibited strong, self-funded revenue growth, often achieved through differentiated products and services. They have also used a targeted approach to M&A and portfolio strategy and have made above-average investments in product excellence and efficiency.

    Southeast Asia stands at an inflection point. Since 2019, nominal GDP has increased by 6% annually while market-cap-weighted TSR has reached 12%. However, the median TSR stands at just 4%, highlighting uneven performance. To unlock their full potential, enterprises must be both great companies (profitable and competitively advantaged) and have great stocks (with sustained TSR, optimal multiples, and a loyal long-term investor base). Companies that combine strategic clarity, investor alignment, and strong capital management will lead the next phase of the region’s TSR outperformance and set the standard for sustainable success.

    Common Threads in Value Creation

    Across these markets, we see five key themes for promoting higher TSR:

    • Aligning strategy with shareholder value is essential. Leading Asia-Pacific companies are integrating TSR analytics into their core strategy, linking business decisions to capital-market outcomes. TSR has become not just a scorecard but a management system.
    • Governance is the new growth driver. As India’s and China’s markets show, strong governance and transparent capital allocation inspire investor confidence and lift valuation multiples.
    • Communication creates value. Japan’s equity storytelling success illustrates that clarity, credibility, and empathy with investor expectations can move markets.
    • Portfolio focus matters. Australia’s long-term outperformers demonstrate that pruning noncore assets and reinvesting in competitive advantages are essential to sustained TSR.
    • Capital discipline attracts investors. Southeast Asia’s emerging leaders highlight the importance of rigorous capital allocation and alignment with investor types to translate economic growth into shareholder returns.

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    Lessons for the Rest of the World

    Asia-Pacific’s story is instructive for any company seeking to create lasting value amid shifting capital markets. Success in the region shows that superior TSR doesn’t depend solely on scale or macroeconomic tailwinds but on mindset: aligned incentives, disciplined governance, and a willingness to prioritize transparent communication with investors.

    Companies in the rest of the world can learn from the Asia-Pacific region’s best value creators by embedding TSR thinking into their strategy, embracing investor partnership as a source of strength, and maintaining agility in an age of technological and geopolitical disruption. At a time when resilience is the ultimate competitive advantage, this region offers both the playbook and the proof.

    Asia-Pacific companies have an opportunity to transform from growth to greatness in the coming decade. By deepening their commitment to disciplined capital deployment, governance excellence, and strategic communication, these companies can increase shareholder returns and set a new global standard for sustainable value creation.

    The 2025 Southeast Asia Value Creators Report
    Australian Value Creators: 20 Years of Excellence


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  • Apollo moves fast-growing lending unit out of storied buyout division

    Apollo moves fast-growing lending unit out of storied buyout division

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    Apollo has moved a fast-growing unit focused on complex lending out of its prized buyout division, in the latest sign of a shift towards private credit and away from a business that built it into a $900bn behemoth.

    The shake-up, which has not been previously reported, began earlier this year and was announced at a town hall this week, according to people familiar with the matter and a presentation seen by the Financial Times.

    Matt Nord, formerly co-head of private equity at Apollo, will helm the newly separated group known as hybrid capital, which crafts complex debt structures that are often attached to minority equity investments.

    Reed Rayman, a rising star who was behind Apollo’s lucrative takeovers in 2021 of Yahoo and AOL, was appointed deputy head of hybrid investing alongside veteran Apollo credit investor Chris Lahoud.

    The move highlights how chief executive Marc Rowan is pinning Apollo’s future on lending to businesses, a strategy that has transformed the group into a formidable challenger to the world’s biggest banks.

    It also comes as Rowan, who was elevated to CEO in 2021 after the exit of its billionaire co-founder Leon Black, has told Apollo’s employees and shareholders that splashy corporate buyouts are no longer a growth driver.

    “Private equity is an amazing asset class. It’s just not a growth business,” Rowan said at an investor conference on Wednesday.

    He added: “I think the growth you will see in our equity business will come in two places. One will be hybrid, and the second will be a reimagination of what private equity is as an industry.”

    David Sambur, Apollo’s veteran dealmaker, will be the sole head of its $127bn private equity business, which also includes real estate deals and second-hand fund stakes.

    Nord will remain co-head of Apollo’s flagship PE funds alongside Sambur, but will be less involved with the unit’s day-to-day operations.

    Apollo declined to comment.

    Rowan has positioned Apollo to be a lender to companies at the centre of the artificial intelligence and energy infrastructure boom that require complex financings suited for private capital groups with locked-up capital and not regulated banks funded with flightier deposits.

    By offering companies such as Intel customised borrowings, Apollo has been able to appeal to groups that need financing that does not resemble a traditional bond or common equity. For example, in the chipmaker’s transaction, Apollo designed an off-balance sheet joint-venture that allowed it to raise cash that still resembled a high-rated loan.

    Rowan has presented these lending commitments as opportunities for Apollo’s traditional private equity dealmakers to underwrite large, complex investments, but outside of the mould of traditional buyouts — a crowded marketplace with little differentiation among buyout firms.

    Apollo’s prominent recent hybrid deals include financing a takeover of members club Soho House and the carve-out of a large unit of waste management group GFL Environmental. The division has also worked with large companies such as Keurig Dr Pepper.

    Nord and Rayman were also part of a recent partnership with venture firm 8VC to invest several billions of dollars of hybrid investments into what Apollo has called the “next wave of American industrial innovation”.

    In recent years, Apollo’s hybrid business has earned far higher returns than its traditional buyouts. Since the beginning of 2024, hybrid deals earned nearly 20 per cent returns annualised, while recent buyouts earned less than 8 per cent, according to company filings.

    However, Apollo continues to believe its private equity business will see a good reception from investors as it raises a new flagship corporate buyout fund. The group is seeking to raise $25bn for its newest buyout fund, an increase from a predecessor fund that raised $20bn, according to people briefed on the matter.

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  • Energy industry seeks alternatives to combat supply chain strain

    Energy industry seeks alternatives to combat supply chain strain

    This year’s Data Center World Power show, held in San Antonio, Texas, produced an unexpected star turn: an industrial-scale gas turbine created from the retrofitted engine of a decommissioned passenger aircraft.

    The high level of interest in this unconventional mini power plant — manufactured by power services group ProEnergy and which can produce enough dispatchable electricity to power up to 40,000 homes — illustrates the significant supply difficulties affecting the global power industry.

    In the face of growing demand from megawatt-hungry artificial intelligence, coupled with an upward trend in consumer electricity use, global power demand is growing at almost 4 per cent per year.

    Efforts by power producers to meet this rising demand have created a race to secure key components such as electric cables, switchgears, and turbines, leading to complaints of significant backlogs across a host of critical industries, says Fabricio Sousa, president of energy advisory firm, Worley Consulting.

    Companies can wait up to five years to procure a large transformer or gas turbine, he notes, making supply shortages “one of the defining constraints” of AI’s acceleration. “We have a dynamic situation where demand is running at a sprint and supply at a marathon pace,” he says.

    Factors other than just rising demand are also at play. The most obvious are tariff-induced disruptions to global trade in key components, particularly into the US. China’s rapid deployment of renewable energy infrastructure is also absorbing equipment otherwise destined for export.

    But experts say the supply gap is not equal for all industries. The renewable energy sector, for instance, remains comparatively free of bottlenecks, thanks in large part to significant investment in manufacturing capacity and falling production costs over recent years.

    “When it comes to batteries, electric vehicles, wind turbines, solar panels, hydrogen electrolysers, all of this stuff, the market is actually heavily oversupplied right now,” says Antoine Vagneur-Jones, head of trade and supply chains at BloombergNEF.

    Data centres are also comparatively shielded from the effects of supply constraints because of the market leverage that their greater spending power affords them. Even so, buyers that succeed in procuring critical components can expect to pay over the odds.

    According to data collected by BloombergNEF, equipment shortages contributed to a 71 per cent increase in the US producer price index of power and distribution transformers between 2020-2024.

    In response, many manufacturers are increasing production. Hitachi Energy recently committed to invest more than $1bn to expand its production of electrical grid infrastructure in the US. Mitsubishi Heavy Industries, ABB, Siemens and GE Vernova are among others to have made similar scaling up pledges.

    Building up more regional capacity represents another strategy adopted by manufacturers. Global energy technology specialist Schneider Electric, for example, operates a “multi-hub approach” in which it splits operations equally between France, Hong Kong and North America.

    “This means we’re able to respond quickly and flexibly to shifting needs, supporting projects in regions where electrification and renewables are accelerating fastest,” says Frédéric Godemel, Schneider’s executive vice-president of energy management.

    Even so, BloombergNEF’s Vagneur-Jones remains sceptical that such moves are enough to cover current backlogs, let alone meet future orders. Manufacturers could bet bigger, he says, but past experience is leading them to “play it very carefully” when it comes to scaling up.

    “Back in 2017-18, they announced lots of new facilities in the expectation that gas demand was going to go up and thus demand for their equipment, but it didn’t and they got burned pretty badly,” he explains.

    As a consequence, large-scale power users with the financial resources, such as data centres, are choosing to invest in their own on-site electricity generation. But, if getting hold of gas turbines is proving hard, what are the alternatives?

    The list is long but complex to navigate. One possibility is smaller gas turbines, for instance. They benefit from a shorter wait time but, compared with their larger equivalents, their power output is lower and more expensive.

    Another option being explored by data centres are combustion-style reciprocating engines. Again, these are comparatively easy to procure and deploy, but design limitations such as lower rotational speed and scaling challenges mean they are unsuitable as a primary power source.

    Many alternatives are less than ideal. Some, like fuel cells, which create electricity from electrochemical processes rather than combustion, are too expensive. Others, such as geothermal or small-scale nuclear, remain experimental or take too long to install.

    One possible exception is renewable power supported by battery storage, suggests Mike Hemsley, deputy director at the Energy Transitions Commission, a coalition of leaders in the clean energy sector. Even then, however, intermittency issues, low market penetration, and the high (albeit falling) cost of battery storage systems still present hurdles. 

    A jack-up installation vessel stands raised at sea beside towering wind turbines, with a large crane ship working nearby.
    One of renewable power group Vattenfall’s offshore wind turbines © Vattenfall

    “The best alternative is probably a mix of solar plus wind plus batteries, together with a grid connection maybe and perhaps also some natural gas if you can get it,” he concludes.

    Another way to ease supply-side pressures involves redesigning products. One cause of supply delays and high costs is the scarcity of rare earth metals and other raw materials that go into electrical equipment. Swapping in more readily accessible alternatives could present a way around this, as efforts to make electric cables from aluminium rather than copper illustrate.

    In the attempts to resolve current supply problems, advocates of clean energy fear that moves by power producers to revert to fossil fuel-based solutions could stall the greening of the grid.

    Claus Wattendrup, UK country manager of renewable power group Vattenfall, is adamant that such an eventuality can and should be avoided. What equipment manufacturers are lacking, he suggests, is a clear commitment by governments to press ahead with the energy sector’s electrification.

    “For suppliers, consistent and growing demand is essential to justify investment in new manufacturing capacity,” he says. “But without the certainty that comes from stable policy frameworks and predictable deployment, the industry risks losing momentum.” 

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  • New method improves the reliability of statistical estimations | MIT News

    New method improves the reliability of statistical estimations | MIT News

    Let’s say an environmental scientist is studying whether exposure to air pollution is associated with lower birth weights in a particular county.

    They might train a machine-learning model to estimate the magnitude of this association, since machine-learning methods are especially good at learning complex relationships.

    Standard machine-learning methods excel at making predictions and sometimes provide uncertainties, like confidence intervals, for these predictions. However, they generally don’t provide estimates or confidence intervals when determining whether two variables are related. Other methods have been developed specifically to address this association problem and provide confidence intervals. But, in spatial settings, MIT researchers found these confidence intervals can be completely off the mark.

    When variables like air pollution levels or precipitation change across different locations, common methods for generating confidence intervals may claim a high level of confidence when, in fact, the estimation completely failed to capture the actual value. These faulty confidence intervals can mislead the user into trusting a model that failed.

    After identifying this shortfall, the researchers developed a new method designed to generate valid confidence intervals for problems involving data that vary across space. In simulations and experiments with real data, their method was the only technique that consistently generated accurate confidence intervals.

    This work could help researchers in fields like environmental science, economics, and epidemiology better understand when to trust the results of certain experiments.

    “There are so many problems where people are interested in understanding phenomena over space, like weather or forest management. We’ve shown that, for this broad class of problems, there are more appropriate methods that can get us better performance, a better understanding of what is going on, and results that are more trustworthy,” says Tamara Broderick, an associate professor in MIT’s Department of Electrical Engineering and Computer Science (EECS), a member of the Laboratory for Information and Decision Systems (LIDS) and the Institute for Data, Systems, and Society, an affiliate of the Computer Science and Artificial Intelligence Laboratory (CSAIL), and senior author of this study.

    Broderick is joined on the paper by co-lead authors David R. Burt, a postdoc, and Renato Berlinghieri, an EECS graduate student; and Stephen Bates an assistant professor in EECS and member of LIDS. The research was recently presented at the Conference on Neural Information Processing Systems.

    Invalid assumptions

    Spatial association involves studying how a variable and a certain outcome are related over a geographic area. For instance, one might want to study how tree cover in the United States relates to elevation.

    To solve this type of problem, a scientist could gather observational data from many locations and use it to estimate the association at a different location where they do not have data.

    The MIT researchers realized that, in this case, existing methods often generate confidence intervals that are completely wrong. A model might say it is 95 percent confident its estimation captures the true relationship between tree cover and elevation, when it didn’t capture that relationship at all.

    After exploring this problem, the researchers determined that the assumptions these confidence interval methods rely on don’t hold up when data vary spatially.

    Assumptions are like rules that must be followed to ensure results of a statistical analysis are valid. Common methods for generating confidence intervals operate under various assumptions.

    First, they assume that the source data, which is the observational data one gathered to train the model, is independent and identically distributed. This assumption implies that the chance of including one location in the data has no bearing on whether another is included. But, for example, U.S. Environmental Protection Agency (EPA) air sensors are placed with other air sensor locations in mind.

    Second, existing methods often assume that the model is perfectly correct, but this assumption is never true in practice. Finally, they assume the source data are similar to the target data where one wants to estimate.

    But in spatial settings, the source data can be fundamentally different from the target data because the target data are in a different location than where the source data were gathered.

    For instance, a scientist might use data from EPA pollution monitors to train a machine-learning model that can predict health outcomes in a rural area where there are no monitors. But the EPA pollution monitors are likely placed in urban areas, where there is more traffic and heavy industry, so the air quality data will be much different than the air quality data in the rural area.

    In this case, estimates of association using the urban data suffer from bias because the target data are systematically different from the source data.

    A smooth solution

    The new method for generating confidence intervals explicitly accounts for this potential bias.

    Instead of assuming the source and target data are similar, the researchers assume the data vary smoothly over space.

    For instance, with fine particulate air pollution, one wouldn’t expect the pollution level on one city block to be starkly different than the pollution level on the next city block. Instead, pollution levels would smoothly taper off as one moves away from a pollution source.

    “For these types of problems, this spatial smoothness assumption is more appropriate. It is a better match for what is actually going on in the data,” Broderick says.

    When they compared their method to other common techniques, they found it was the only one that could consistently produce reliable confidence intervals for spatial analyses. In addition, their method remains reliable even when the observational data are distorted by random errors.

    In the future, the researchers want to apply this analysis to different types of variables and explore other applications where it could provide more reliable results.

    This research was funded, in part, by an MIT Social and Ethical Responsibilities of Computing (SERC) seed grant, the Office of Naval Research, Generali, Microsoft, and the National Science Foundation (NSF).

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  • Tomago Aluminium welcomes continued collaboration on future operations – Rio Tinto

    1. Tomago Aluminium welcomes continued collaboration on future operations  Rio Tinto
    2. Australia news live: states reject PM’s $20bn health deal; measles alert for several locations in Sydney  The Guardian
    3. Federal politics live: States and territories reject Commonwealth public hospital funding offer  Australian Broadcasting Corporation
    4. Major smelter’s future secured after taxpayer bailout  The Canberra Times
    5. Australia’s Albanese Pledges Deal to Save Rio Aluminum Plant  Bloomberg.com

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  • 5 year RDTI review strong business backing economic impact

    5 year RDTI review strong business backing economic impact

    By Brendan Ng, David Creagh and Aaron Thorn

     

    The Ministry of Business, Innovation and Employment first five-year evaluation report of the Research and Development tax incentive regime asked whether the 15% R&D Tax Incentive tax credit (RDTI) is encouraging more businesses to undertake R&D and whether the government is getting “bang for the buck” on the investment.

    What are the reports key findings?

    For those who haven’t yet discovered it (we know you’re out there!), the RDTI was introduced in April 2019 and provides a 15% tax credit on eligible R&D expenditure. The purpose of the RDTI is to broaden access to R&D support and stimulate innovation.

    The Report considered whether the 15% tax credit is incentivising further R&D to be undertaken and its effect on growth on New Zealand’s economy. In summary:

    • Projected economy-wide benefit of the RDTI: 4.2 times government investment, equating to a boost to New Zealand’s GDP of $6.8 billion over the five-year period.

    • Total additional R&D expenditure: $1.833 billion (present value) – with supported firms on average spending $274,000 more on R&D annually.

    • “Bang for the buck” (BFTB) ratio (additional expenditure per dollar of support provided) is 1.4, consistent with OECD benchmarks. This compares to a BFTB ratio of 0.83 under the Growth Grant regime.

    • Net impact after government costs: $221 million.

    • Innovation gains appear two years post-support, with a 6.1 percentage point increase in innovation rates, with supported firms showing higher growth in output, capital, and employment.

    • No significant productivity effect has yet emerged, reflecting the short evaluation window.

    The RDTI regime seems to have achieved its goal, with key figures for the 2020-2024 period being:

    • 1,752 firms supported, with $1.074 billion in tax credits provided.

    • By 2023, supported firms accounted for 65% of total business R&D expenditure, compared to 44% under Growth Grants.

    This all seems to suggest that the RDTI has made a positive impact and is a welcome addition to the New Zealand innovation landscape. However, behind the numbers there may be other considerations.

    So, is the R&D tax incentive working as intended?

    Short answer: yes. Long answer: there is room for improvement.

    The report, prepared by Motu Economic and Public Policy Research and The University of Otago, is overwhelmingly positive in relation to the RDTI, noting that firms supported by the RDTI spent more on RDTI than they would have in the absence of RDTI support and that it is outperforming the Growth Grant scheme it replaced. The report states that given the rate of recent change in New Zealand’s approach to supporting business R&D, and the potentially positive impact of stability on business decision making, there appears to be a strong case for preserving a stable support mechanism (i.e. the RDTI regime) in the medium term.

    However, there is unpredictability in the processing time for Supplementary Returns – which extends the time between businesses outlay on the R&D and when it received the incentive – and a lack of discretionary powers available to the Commissioner of Inland Revenue that is disproportionately penalising companies for minor missteps.  

    Is New Zealand’s RDTI scheme globally competitive?

    The Report briefly covers how the RDTI regime compares with similar overseas regimes, but notes that there are difficulties in comparison given different externalities and design features. Australia is the best and easiest comparison and the report found that Australia’s scheme may be more generous for SMEs and offer more flexibility for overseas and software R&D. However, the tightening of the requirements for Overseas Findings has had a significant impact on the ability to claim overseas costs in the Australian scheme.

    The Report also notes that Inland Revenue takes a vigorous approach to reviewing eligible R&D expenditure, and the rates of revision following review appear to reflect a greater level of expenditure scrutiny when compared with some overseas schemes.

    Deloitte’s experience has been that the additional certainty provided by the RDTI’s review process, which culminates with the issuance of a binding approval for the R&D activities, far outweighs the additional administrative burden of the review process. The report notes that these review processes are rare amongst R&D tax credit policies and are effective safeguards against error and fraud. This should hopefully protect New Zealand’s RDTI scheme from some of the issues with R&D incentive schemes that have been encountered overseas.

    What else did we find interesting in the report?

    The Report covered feedback from stakeholders on how well the RDTI is working for them. Some of the feedback noted:

    • High compliance costs, particularly for firms spending under $300,000 on R&D.

    • Administrative delays in processing Supplementary Returns.

    • Restrictive software eligibility rules misaligned with the standard iterative development process.

    • Policy instability which undermines confidence and planning.

    Much of this aligns with the feedback Deloitte has heard on the RDTI, however we do note that many of these grumbles have fallen away as businesses gain a better understanding of the RDTI with time. In particular, R&D in the software development space is a very strong area of claim, with Officials and guidance supporting the inclusion of software R&D in the RDTI regime. We recommend reaching out if you have any queries on whether your software development work would qualify as an eligible R&D activity.

    The Report doesn’t directly suggest immediate action is undertaken to make changes to the RDTI, but it does provide a number of suggested recommendations, including:

    • Maintain policy stability to support long-term planning.

    • Streamline compliance for smaller firms, possibly through simplified approval processes.

    • Revisit software eligibility rules and clarify guidance.

    • Introduce greater discretionary powers for the Commissioner of Inland Revenue to enable the correction of administrative errors.

    It is notable that tiered credit rates (with a credit rate greater than 15% for the first $300k of R&D spend) and higher overseas expenditure caps were modelled and were found to deliver negative net impacts (based on various assumptions).

    The report notes that the administrative challenges with running the scheme have swung from the initial overly restrictive application of the eligibility tests at the General Approval application stage to unpredictability in the processing times for Supplementary Returns. Underlying this are the challenges compliance officers encounter in determining the scope of the approved activities in the claim and therefore whether a particular expense relates to the approved activities. To help resolve this, the Inland Revenue and Callaghan Innovation (who have now moved into MBIE) teams are increasing their integration, with the Callaghan team beginning to receive Supplementary Returns to review for the first time.

    Overall, it is clear from the Report that there are changes that could be made to the RDTI regime to enhance the benefits it provides both businesses and New Zealand alike.

    What’s next?

    The current Government hasn’t commented on the released Report, so it’s hard to say whether any changes will come out of it. However, we do understand that the RDTI is being considered, amongst other things, in relation to the Government’s Going for Growth initiative. Additionally, the increased scrutiny of the link between activities approved in General Approval applications and expenditure claimed reinforces the need to ensure the project’s costs are considered comprehensively at the General Approval stage.

    If you have any questions on what changes might be coming to the RDTI, or if you have any questions on whether your business would qualify for the 15% tax credit, please get in touch with your usual Deloitte advisor. 

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  • Final two shortfall penalty guidance documents published

    Final two shortfall penalty guidance documents published

    Ms B carries on a business through her company, C Ltd. In each of the 2012–2017 tax  years she provides management services to C Ltd and, in return, C Ltd pays her a salary of between $150,000 and $200,000.

    In the 2018 tax year, C Ltd’s revenue reduces due to adverse market conditions. C Ltd also requires funds to meet capital expenditure. Ms B decides to forego her salary so C Ltd can pay for the capital expenditure and meet its ongoing operating costs.

    By the start of the 2020 tax year, market conditions have improved, and C Ltd has met its capital expenditure needs and is trading near the levels it was trading at before the 2018 tax year. Despite this, C Ltd does not resume paying Ms B a salary. This creates a shortfall in the funds Ms B needs to meet her private expenditure. Ms B funds the shortfall using periodic borrowings obtained from C Ltd, and C Ltd funds the borrowings out of retained earnings. The borrowings are repayable on demand and interest is charged at the fringe benefit tax rate. All interest is capitalised at year end. The advances are recorded in a loan account Ms B maintains with C Ltd. At the end of the 2025 tax year, the account balance is $950,000.

    The Commissioner considers s BG 1 of the ITA 2007 applies to the loan advances in the 2020–2025 tax years and proposes to treat the advances as income under s GA 1 of the ITA 2007. Ms B disputes this. In support of her position, she contends: 

    • the amounts she received cannot be taxed as income because they are loan advances

    • the terms on which the advances were made are not objectionable because they are typical of the terms used in related-party transactions

    • her initial decision to stop being paid a salary had a commercial purpose of leaving funds in C Ltd to be used for business purposes

    • a person is entitled to live off capital, and under the loan she received advances of capital that she intends to repay.

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  • Emissions Trading Scheme for non-forestry industries

    Emissions Trading Scheme for non-forestry industries

    By Annamaria Maclean and Andrea Scatchard

     

    Inland Revenue has released its final interpretation statement ‘Income tax and GST – industries other than forestry registered in Emissions Trading Scheme’ (IS 25/24). This statement applies to industries participating in the Emissions Trading Scheme (ETS) (excluding forestry, which is subject to separate tax treatment) and encompasses emissions-intensive and trade-exposed sectors, as well as those engaged in removal activities and certain horticultural operations.

    The interpretation statement addresses the intricacies of ETS-related rules for non-forestry industries and should be carefully reviewed by affected parties.

    In summary, the interpretation statement outlines that businesses may claim deductions for emissions liabilities incurred, calculated according to the number of New Zealand emission units (NZUs) required to be surrendered based on production levels and on an accrual accounting basis.

    NZUs can be obtained through purchase in the open market or, in some cases, received as “free NZUs” as an annual government subsidy. The statement clarifies that NZUs are considered revenue account property, with specific valuation requirements upon acquisition and at balance date. Additional complexity arises when businesses are allocated free NZUs; rather than reducing the emissions liability deduction due to receipt of free NZUs, the market value of these units at balance date generates income that offsets the emissions liability deduction.

    Challenges may also occur if there is a shortfall or excess in the number of free NZUs provided or when a business’s balance date does not correspond with the emissions year’s calendar period.

    The statement highlights the complexity in accurately monitoring and documenting all purchased and free NZUs held, including their valuation and method of disposal (whether sold or surrendered) from a tax perspective, noting this may differ from NZU register records. As part of robust tax governance, it is essential for impacted taxpayers to monitor compliance and assess their tax positions annually to ensure that they are following the guidance outlined in the interpretation statement.

    Many submitters on the exposure draft of the interpretation statement highlighted the significant complexity inherent in the current ETS regime for non-forestry industries. Submitters have advocated for legislative reforms aimed at simplifying the regime’s application and reducing administrative burdens for affected taxpayers.

    Among the changes proposed by submitters are measures to remove the taxation of stockpiled free NZUs that have not been surrendered (or sold) to offset an emissions liability in an income year. Additionally, there are calls to allow taxpayers to calculate emissions liabilities and allocation of NZUs based on the emissions year that ends within their income year (much like inclusion of income from limited partnerships and CFCs), which would facilitate easier tracking and reconciliation of NZUs and associated tax obligations.

    It is understood that these submissions have been forwarded to the Inland Revenue Tax Policy team for consideration. We will continue to monitor developments and keep readers informed regarding any future changes that may arise from this ongoing review process.

    Please reach out to your usual Deloitte advisor if you have any queries on the ETS regime. 

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  • Software development and SaaS expenditure under policy spotlight

    Software development and SaaS expenditure under policy spotlight

    By Joe Hope, Brendan Ng and Robyn Walker

     

    Back in 1993, the internet was something you dialled into (if you’d even heard of it), the cloud referred to actual clouds, and software came on floppy disks. Needless to say, a lot has changed since then.

    Yet surprisingly, New Zealand’s tax laws and guidance for software still carry traces of that bygone era. Recognising the need for change, Inland Revenue has launched consultation on the income tax treatment of software development expenditure and the costs of configuring and customising Software-as-a-Service (SaaS).

    What’s on the table?

    At this stage… not much in terms of proposals. The consultation isn’t advancing specific policy options yet. Instead, it seeks to identify the challenges businesses face when determining the tax treatment of software-related expenditure and clarify which costs should be immediately deductible and which should be capitalised and depreciated. Detailed policy proposals are expected in a later round of consultation.

    That said, the paper does hint at Inland Revenue’s thinking on software development and SaaS customisation costs. Here’s what you need to know.

    Software development expenditure

    The paper first looks at expenditure on software developed for sale or licensing, asking whether current approaches provide an appropriate basis for deductibility or depreciation. It outlines three main approaches currently in use:

    1. Trading stock approach

    In 1993, Inland Revenue’s position was that software development costs should be immediately deductible as the cost of producing trading stock. This made sense when software was sold on disks or CDs. Today, with software typically licensed or delivered as a service, Inland Revenue considers this approach outdated except where there is a full copyright assignment as part of an outright sale.

    2. Depreciation approach

    These days, software is typically distributed under non-exclusive licences or as a service, rather than sold outright, meaning it no longer qualifies as trading stock. Recognising this, Inland Revenue issued an issues paper in 2016 stating that software development expenditure should generally be capitalised as depreciable intangible property, with depreciation deductions applying when the software is available for use.

    Under this approach:

    • The applicable depreciation rates are 50% (diminishing value) or 40% (straight line).

    • Upgrades can be capitalised and depreciated.

    • Abandoned projects may qualify for a deduction under section DB 40B of the Income Tax Act 2007.

    • Timing depends on asset recognition and whether the R&D rules apply.

    Notably, this 2016 view was never finalised as Inland Revenue and tax administrations around the world continued to grapple with tax implications of software. However, most taxpayers would be using the depreciation approach (or the R&D approach described below), which often leads to questions of what expenditure, how much expenditure, and when expenditure should be capitalised. These questions are particularly relevant when considering the iterative nature of software development, especially in relation to maintenance and upgrades, and whether there is actually an upgrade or an improvement to the software.

    3. R&D approach

    Under section DB 34 of the Income Tax Act 2007, expenditure meeting the IFRS accounting definition of research or development (see NZ IAS 38 ‘Intangible Assets’) can be fully deducted in the year incurred or carried forward until an intangible asset must be recognised. Depreciation then applies to any remaining capital expenditure not covered by this section.

    The paper acknowledges that applying section DB 34 can be challenging in practice. From our experience section DB 34 can provide businesses with a lot of clarity and reduce their compliance costs, however it is important to consider all the requirements for applying NZ IAS 38 and make sure that appropriate processes are put into place to be certain the appropriate position is taken.

    The consultation paper also highlights that section DB 34 can result in asymmetric results. That is, expenditure can be deducted under section DB 34 but gains from the sale of assets created from the R&D may be non-taxable capital gains. Inland Revenue suggest a more symmetrical approach is justified, indicating this is likely something Inland Revenue will look at in more detail in the next round of consultation.

    Inland Revenue’s view

    Inland Revenue concludes that the current approaches to determining deductibility are broadly acceptable. However, they are seeking feedback on whether the unique nature of software development creates incorrect outcomes and whether alternative methods are warranted.

    Software-as-a-Service (SaaS)

    The second half of the consultation paper addresses configuration and customisation costs incurred by taxpayers licensed to use a SaaS application owned by a third party. In these arrangements, the SaaS provider hosts the software on its own cloud infrastructure and grants customers the right to use it. Business customers often require changes to the standard application of this software, which fall into two categories:

    • Configuration: Adjusting settings within existing code.

    • Customisation: Modifying or adding code to create new functionality.

    For accounting purposes, the key question is whether any configuration or customisation creates an intangible asset. If no intangible asset is recognised (because the customer doesn’t control the software or no new resource separate from the software and controlled by the customer is created), costs are generally expensed.

    For tax purposes, Inland Revenue’s 2023 interpretation guideline (covered in a previous Tax Alert) clarified that SaaS configuration and customisation costs may, depending on circumstances, be deductible as development expenditure or treated as relating to depreciable intangible property. But issues have emerged.

    Under current law, deductions are allowed only if they meet section DA 1 (the general permission) and aren’t denied by the capital limitation in section DA 2(1). Inland Revenue considers the general permission to be met, but the capital limitation likely to apply, with the result being that the costs must be capitalised. Depending on the terms of the SaaS arrangement, a taxpayer may then be able to depreciate the right to use software under either the depreciable intangible property or fixed life intangible property rules.

    Alternatively, even if the capital limitation does apply, section DB 34 could override this limitation if the costs qualify as “research” or “development” under NZ IAS 38, allowing the costs to be immediately expensed. The guidelines conclude that SaaS C&C costs are unlikely to be research but could be development; but would only fall under section DB 34 where the development work is undertaken in-house (i.e. not by a third party such as the SaaS provider).

    From here, the consultation paper concludes that allowing SaaS C&C costs to be deductible under section DB 34 is not “tenable” from a policy perspective, though gives no reasoning other than the compliance burden. Instead, the paper suggests the best approach is for taxpayers to capitalise and depreciate all SaaS C&C costs—though officials are open to feedback on other approaches that may minimise compliance costs.

    Deloitte’s view

    Deloitte disagrees with Inland Revenue’s conclusion that allowing SaaS C&C costs to be deductible is untenable. Aligning the tax treatment with the IFRS treatment would be simpler, as SaaS costs expensed for accounting purposes are often hard to identify and capitalise for tax. Divergence between accounting and tax treatment creates unnecessary compliance costs for what is a minor timing difference (depreciation over roughly two and a half years given high depreciation rates for software). A separate rule / de minimis rule for those taxpayers who do not follow IFRS would also help.

    Next steps

    Submissions on the consultation close on 30 January 2026.

    If you have questions about software or SaaS tax treatment, or if you would like to make a submission, please contact your usual Deloitte advisor.

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  • Get A Ringside View On Giti Tire’s EV-Powered Race To Catch Up With The World’s Leading Tiremakers

    Get A Ringside View On Giti Tire’s EV-Powered Race To Catch Up With The World’s Leading Tiremakers

    As an eventful 2025 draws to a close, it’s worth reflecting on its biggest moments. Few pundits could have predicted that this year would bring us a new spectator sport: trade policy. The muscular tariff regime of Trump 2.0 unleashed turmoil that governments and businesses around the world scrambled to address. Some were better prepared than others, such as the protagonist of our cover story, former medical doctor Enki Tan, now executive chairman of Singapore-headquartered Giti Tire, a tiremaker with Indonesian roots.

    Tan’s global ambitions for Giti (pronounced “GT”) spurred him to invest $560 million in building a U.S. factory in 2017 to be closer to the company’s American customers. In another prescient move, Tan went all out to sharpen Giti’s technological edge in a growing segment of the market: tires for electric vehicles. In September, Chinese EV giant BYD’s new electric hypercar, sporting Giti’s wheels, notched a speed record of nearly 500 kilometers per hour to become the world’s fastest production car. As Tan disclosed to our contributing editor Ardian Wibisono, tires these days are loaded with much more than meets the eye: “I have people telling me, ‘Hey, they’re very easy to make. You just pour the rubber inside the mold and then the tire comes out.’ It’s not so easy.”

    Indeed, it wasn’t an easy year either for the tycoons on the accompanying list of Indonesia’s 50 Richest as a spell of civil unrest marked by street protests made investors skittish. Despite the uncertainty, the benchmark stock index was up by double-digits, resulting in the combined wealth of the country’s richest, ably compiled by our wealth team, crossing $300 billion.

    Scaling up to the billion-dollar valuation mark is an uncommon feat for companies in New Zealand. One among a handful of Kiwi unicorns is agritech firm Halter, profiled by our reporter Catherine Wang. Halter’s founder and CEO Craig Piggott, who grew up on his parents’ dairy farm in Matamata, a town immortalized as a filming location of Lord of the Rings, created a solar-powered smart collar for cows to help farmers manage their herds through virtual fencing technology. An alum of our 30 Under 30 Asia list of young achievers (class of 2021), Piggott is looking further afield to the U.S. as Halter’s next growth market.

    In a month that marks the season of giving, we present a selection of Asia-Pacific’s notable givers in our annual Heroes of Philanthropy list. This unranked group, curated by a team led by editorial director Rana Wehbe Watson, spotlights wealthy individuals and families backing worthy causes, such as supporting young women studying science, technology, engineering and mathematics.

    To round up the philanthropy theme is a stateside story about billionaire couple Cari Tuna, a former journalist, and her husband, Facebook cofounder Dustin Moskovitz, who are giving away the bulk of their multibillion-dollar fortune as fast as they can. Their charity, Coefficient Giving, backs a range of causes, such as AI safety research.

    As the year turns, a heads-up about what we should brace for: Speed of Change, the theme of our Forbes Global CEO Conference to be held in Singapore in the fourth quarter of 2026. As always comments welcome at executiveeditor@forbesasia.com.

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