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We encourage businesses to look into whether they might be eligible for the tax incentive by referring to draft guidance issued by IR(external link).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:

The Taxation (Research and Development Tax Credits) Bill(external link)

Regulatory Impact Statement [PDF, 161 KB] 

Commentary on the Taxation (R&D Tax Credits) Bill [PDF 851KB](external link)

Policy changes from the discussion document

Read how the proposed policies changed following feedback [PDF, 326 KB]

Briefing documents for download

Cover note for release of R&D tax incentive briefings 14 June – 29 August 2018 [PDF, 216 KB] 

Approach to the R&D tax incentive bill (redacted)  [PDF, 72 KB]

R&D Tax Incentive - Summary of Submissions (redacted)  [PDF, 1.5 MB]

Report on UK and Norway R&D Tax Credit Schemes (redacted) [PDF, 180 KB] 

R&D tax incentive for implementation (redacted) [PDF, 113 KB] 

R&D Tax Incentive Support for loss-making firms and transition arrangements (redacted)  [PDF, 123 KB]

Cabinet paper R&D tax incentive for implementation (redacted) [PDF, 113 KB] 

Options to expedite transition of Growth Grant customers to R&D Tax Incentive (redacted) [PDF, 107 KB] 

R&D Tax Incentive Extensions to Growth Grant contracts (redacted)  [PDF, 74 KB]

Cabinet Paper R&D tax incentive for implementation (redacted)  [PDF, 328 KB]

Science and Innovation Briefings on the R&D Tax Incentive, 2 November 2017 – 15 May 2018 (redacted) [PDF, 6.9 MB] 

Submissions received

View the submissions for the R&D Tax Incentive consultation.