The R&D Tax Incentive was introduced in the 2019/2020 income year and is designed to encourage businesses in New Zealand to undertake more R&D. It comprises a 15% tax credit that can be claimed for eligible research and development (R&D) costs for activities undertaken in New Zealand. New policy changes allow more loss-making businesses to have this tax credit refunded in cash.
Eligible businesses must:
- Spend between $50,000 and $120 million per year on R&D (businesses spending under $50,000 p.a. may still be eligible if working with an approved R&D provider);
- Perform a core R&D activity in New Zealand through the company or an R&D contractor;
- Conduct business in a fixed establishment in New Zealand;
- Own the results of the R&D (or another company in your corporate group who is a tax resident of New Zealand or your joint venture or partnership must own the results of the R&D);
A business is ineligible for the R&D Tax Incentive if they:
- Receive or are controlled by or associated with a person receiving the Callaghan Innovation Growth Grant for the same income year;
- Are a Crown Research Institute, district health board or tertiary education organisation or are controlled by one of these organisations;
- Are performing R&D on behalf of another business;
- Are a member of a joint venture, a partner in a partnership, or an owner of a look-through company, and not a New Zealand tax resident for the entire tax year.
A core R&D activity must:
- Occur in New Zealand;
- Seek to resolve scientific or technological uncertainty;
- Follow a systematic approach;
- Seek to create new knowledge or new or improved processes, services or goods.
Supporting activities can also be included to support the core activities claimed. A supporting activity must:
- Support the core R&D activity as its only or main purpose; and
- Be required for, and integral to, the core activity.
If you perform a supporting activity before starting a core activity and do not end up doing the core activity, the supporting activity cannot be claimed.