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.
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.
R&D Tax Incentive timeline
Updated: 22 August 2019