A scheme that will support a wide range of businesses to undertake more R&D and grow NZ’s knowledge economy.
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.
We’re working with Inland Revenue to develop information and tools that will help you:
- determine if you are eligible for the new R&D Tax Incentive
- keep the required records to support your application
- enrol for the tax credit if you’re eligible (from late 2019)
- apply at the end of the 2019/20 tax year.
For now we encourage you to look into whether your business might be eligible for the tax incentive by referring to guidance issued by Inland Revenue.
This guidance will help you understand the intent and application of the research and development (R&D) tax credit. It covers:
- eligible activities, entities and expenditure
- using, and becoming, an approved research provider
- claiming and receiving the tax credit, and
- managing disputes.
For year one of the R&D Tax Incentive there is limited refundability available for smaller businesses with cashflow challenges. Refundability means a business can receive the credit as a cash payment, instead of a reduction in a business’s tax liability. There is work underway on a more developed refundability process to support R&D businesses with limited tax liability and the Government is committed to having a decision in place for year two of the scheme.
More information about the background to the R&D Tax Incentive is on MBIE’s website.
Updated: 10 June 2019