Research and development tax incentive
The Government is ambitious about raising New Zealand’s research and development (R&D) expenditure to 2% of GDP over 10 years to create a more productive, sustainable and inclusive economy that will make a material difference to the lives of New Zealanders.
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.
We listened to you and produced a user-friendly, fit-for-purpose scheme that will support a wide range of businesses to undertake more 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 (Expenditure incurred with an approved research provider is not subject to the minimum threshold.)
- 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) Act 2019 passed into law in early May 2019 after receiving Royal Assent. The R&D Tax Incentive will apply to eligible R&D activities conducted by businesses during 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 they should start recording their R&D expenditure now to ensure their records are ready to file at the end of the 2019/20 tax year.
We encourage businesses to look into whether they might be eligible for the tax incentive by referring to draft guidance issued by IR(external link). This guidance will be finalised in the weeks following the Bill’s assent.
The Taxation (Research and Development Tax Credits) Act 2019
The Act which introduced the tax incentive was passed into law in early May 2019. The following related documents track the progress of the legislation through Parliament and the policy development process:
Policy changes from the discussion document
Briefing documents for download
View the submissions for the R&D Tax Incentive consultation.