Inland Revenue’s Research and Development Tax Incentive

The Inland Revenue Department has established a Research and Development (R&D) Tax Incentive which will make a 15% tax credit available from the beginning of the 2019-20 financial year to eligible businesses. The scheme has been introduced by the Government with the aim of increasing the level of R&D conducted in New Zealand to 2% of GDP by 2028.

Further details of the incentive include:

• a minimum R&D expenditure threshold of $50,000 per year;
• a $120 million cap of eligible expenditure
• Refundability for companies in a loss position or with R&D credits greater than income tax liability, capped based on labour-related taxes they or companies in the same group pay.

Eligibility for the tax credit is dependent on the eligibility of the firm, the R&D activity that has been undertaken and the R&D expenditure. In addition, firms must have filed their tax return preferably on time and the R&D supplementary return within 30 days after the due date of the income tax return.

The claim process for the tax credit must be filed online. The R&D supplementary return will require firms to outline R&D activities and the expenditure on the activities. For the 2020-21 financial year, firms will be required to apply for approval of R&D activities by the Commissioner before being eligible to claim the tax credit. This general approval should be applied for before filing the general income tax return and R&D supplementary return.

Some fields of research are automatically ineligible for the R&D Tax Incentive program, including social sciences, arts, humanities and market research. The tax credit received will be reduced for any ineligible expenditure claimed or for claims of inflated expenditure and penalties may apply for over-claimed amounts.

For guidance on how to claim accurately or for questions about eligibility, contact us about having one of our tax specialists assist you. We work with businesses from all industries and sectors with their eligibility requirements, documentation and claim process. Further guidance on the R&D Tax Incentive is also available on the Inland Revenue website.