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Callaghan Innovations: Tax incentive for businesses conducting R & D

As most of you will know, this year the Government is working to introduce a new tax incentive for businesses conducting research and development (R&D).

The R&D tax incentive (RDTI) will help more New Zealand businesses to innovate and contribute to a stronger, more productive economy that benefits us all.

We’re sending out a special edition of our Accelerate newsletter today to update you on the introduction of the RDTI and what you need to do now to prepare for it, if you’re eligible.

Start recording R&D expenditure

As a reminder, the RDTI will give businesses a 15% tax credit if they spend a minimum of $50,000 per year on eligible R&D. Businesses spending under $50,000 may still be eligible, so long as they are using an approved research provider to carry out their R&D.

Importantly, the Taxation (Research and Development Tax Credits) Bill is about to go before Parliament for its Second Reading. If it is passed into law, the RDTI will take effect from the beginning of a business’s 2019/2020 income year.

For most businesses this means R&D expenditure from 1 April 2019 will be eligible for the RDTI, and you should start recording it now – or whenever your business’s 2019/2020 income year begins – to ensure your records are ready to file at the end of the 2019/2020 tax year.

Check your eligibility and record-keeping requirements

Of course, you’ll want to check whether your business might be eligible for the RDTI first.

You can find out more about eligibility and record-keeping obligations in Inland Revenue’s draft guidance material here. Final guidance will be published once the Bill is enacted – and we’ll keep you updated on that.

Note that for year one of the RDTI there is limited refundability available for smaller businesses with cashflow challenges. There is work underway on 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.

Note other government support for R&D

The RDTI is part of a package of government support for NZ’s innovation ecosystem, which includes Callaghan Innovation’s services. Apart from our Growth Grants, which the RDTI has replaced, the rest of our services and products are unaffected by the new initiative. They include:

R&D funding in the form of Project Grants, Student Grants and Getting Started Grants

• our skills development programmes

• the R&D and commercialisation services provided by our scientists and engineers

Scale-Up NZ, a free online platform showcasing NZ’s innovation ecosystem to the world, which is launching on 16 April.

For Growth Grant holders, Callaghan Innovation will continue to work closely with you to ensure a smooth transition to the RDTI.

Find out more

Check out our web page here for an overview of the features of the RDTI. More detail is available on MBIE’s website here.

If you have any questions about the RDTI, Callaghan Innovation, Inland Revenue and MBIE are here to help:

• For technical questions – eg about eligibility or record-keeping – direct your enquiry to Inland Revenue at r+dincentive@ird.govt.nz

• For policy-related questions email the MBIE team at rdincentive@mbie.govt.nz

• If you have questions about your Growth Grant – eg the transition process onto the tax incentive – get in touch with your Callaghan Innovation advisor or email the grants team atggt@callaghaninnovation.govt.nz

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