New Zealand's medical technology sector is voicing concerns over proposed changes to capital gains tax, arguing that restrictions on research and development (R&D) tax refunds could severely impact health startups.

The concerns stem from Labor’s proposed overhaul of tax laws, specifically regarding the treatment of R&D expenditure. Medical technology companies fear that limiting the ability to claim back R&D costs will stifle innovation and hinder the growth of early-stage businesses in the sector.

Industry representatives say the changes, mirroring recent developments in Australia, will make it harder for New Zealand health startups to secure funding and compete internationally. The sector is a significant contributor to the New Zealand economy, generating exports and creating high-skilled jobs. Reduced access to R&D tax benefits could lead to a decline in investment and a loss of talent.

The proposed changes are part of a broader review of New Zealand’s tax system aimed at addressing perceived inequities and increasing government revenue. However, the medical technology sector argues that the impact on innovation and economic growth has not been adequately considered. They are calling for the government to reconsider the proposed restrictions and provide targeted support for R&D in the health sector.

The Australian experience, cited by New Zealand companies, demonstrates the potential negative consequences of similar tax policies. Australian medical technology firms have reported a slowdown in R&D investment and a reluctance to launch new projects following the introduction of stricter refund rules. New Zealand businesses are keen to avoid a similar outcome and are actively lobbying policymakers to protect their interests.