Microsoft testing rental package

By MICHAEL FOREMAN

Microsoft has selected New Zealand as one of three test countries for a "subscription licensing" scheme which will allow users to rent, rather than buy, its software.

The offer applies to the Office XP Professional ESL, which includes Word, Excel, Outlook, PowerPoint and Access, available from May 31 at a full purchase price of $1659 or an upgrade price of $969, both prices including GST.

However, for $439, the subscription licensing offer will allow users to run the package for 12 months and receive free upgrades.

Microsoft spokeswoman Carol Leishman said the subscription model would appeal to users who wanted frequent upgrades.

On the face of it the deal looks expensive, as users will have forked out $1317 over three years. But according to Barbara Baker, a chartered accountant at Whangaparaoa-based Grant Vennell, the rental payments would be fully tax deductible.

Shrink-wrapped software bought in the traditional manner must be capitalised and then depreciated, usually at recommended rates published by Inland Revenue.

For software this rate is 40 per cent, which means a package bought for $1000 will depreciate for tax purposes by $400 over the first year, with a residual value of $600 on the books. In the next year the package will be depreciated by 40 per cent of $600, and so on.

After three years the amount that can be subtracted as an expense using the depreciation method would total $1300. With the rental option the subtraction would be $1317. By the fourth year the difference would be larger - though by that stage you would probably be thinking of upgrading.