R&D funding

R&D Tax Incentive

open this image in new window: Grants gallery

A scheme that will support a wide range of businesses to undertake more R&D and grow NZ’s knowledge economy.

R&D Tax Incentive badge

The Government has committed to raising New Zealand’s research and development (R&D) expenditure to 2% of GDP by 2027.

To reach this target more businesses will need to increase their expenditure on R&D. This will be supported through an R&D Tax Incentive, available from the 2019/2020 tax year for businesses conducting eligible R&D.

Main features of the incentive

The main features of the R&D Tax Incentive include:

  • a credit rate of 15%
  • a $120 million cap on eligible expenditure
  • a minimum R&D expenditure threshold of $50,000 per year
  • a limited form of refunds for the first year of the scheme that will mirror the R&D tax-loss cash-out scheme run by Inland Revenue. A more comprehensive policy will be in place for the second year of the scheme
  • a definition of R&D that ensures the credit can be accessed more easily across all sectors, including the technology sector
  • the inclusion of state-owned enterprises, industry research cooperatives, levy bodies, and minority-owned subsidiaries of select Crown entities.

When the tax credit will apply

The Taxation (Research and Development Tax Credits) Bill was passed into law on 7 May. The R&D Tax Incentive will apply to eligible R&D activities conducted by a business from the 2019/2020 tax year.

For most businesses this means expenditure on eligible R&D undertaken from 1 April 2019 will qualify for the R&D Tax Incentive, and you should record your R&D activities and expenditure now to ensure your records are ready to file at the end of the tax year.

Find out if you’re eligible

To help you determine if your R&D is eligible, we worked with Inland Revenue to develop an easy to use online eligibility tool and guidance.

Answer the questions on the eligibility tool first to get a general indication of whether your R&D may be eligible for the R&D Tax Incentive.

If, after using the eligibility tool, you think your R&D qualifies for the R&D Tax Incentive, consult Inland Revenue's guidance for more detail on eligibility and record-keeping requirements. The guidance explains: 

  • what kinds of organisations are eligible
  • what types of R&D are eligible
  • what kinds of expenditure are eligible
  • record keeping requirements
  • how to register as an approved research provider
  • how to claim and receive the tax credit.

For year one of the R&D Tax Incentive there is limited refundability available, mainly for smaller businesses that are R&D intensive and don’t pay much – if any – income tax. Refundability means a business can receive R&D tax credits in cash, instead of using them to reduce their income tax payable. The new Kiwisaver Bill introduces broader refundability rules to enable more loss-making and pre-profit businesses to access refundable R&D tax credits. If the Bill is enacted, the new rules would apply from year two of the Incentive.

Government recently introduced legislation to put in place a more developed refundability process to support R&D businesses with limited tax liability. The Government is committed to having a decision in place for year two of the scheme.

How to enrol

You can now enrol for the R&D tax incentive with Inland Revenue through your myIR account. Choose the I want to tab and RDTI enrolment. You'll need to answer a few questions to determine eligibility. Once approved, you'll have access to the R&D Tax Incentive workspace where you'll be able to complete the required forms from 1 April 2020.

More information about the background to the R&D Tax Incentive is on MBIE’s website.

Frequently asked questions

Find answers to frequently asked questions about the R&D Tax Incentive

R&D Tax Incentive timeline

R&D Tax Incentive timeline

View full-size image
PDF icon View as PDF

Updated: 17 September 2019