This 2019-20 income year, the government introduced a new research and development (R&D) Tax Incentive that businesses can apply for. The government aims to encourage innovative businesses and a more productive economy by raising R&D expenditure to 2% of New Zealand’s Gross Domestic Product (GDP) by 2027.
The scheme offers a credit rate of 15% on any eligible research and development practices, with a $120 million cap on eligible expenditure. The incentive includes state-owned enterprises, industry research cooperatives, levy bodies, and minority-owned subsidiaries of select crown entities.
To be eligible for the new R&D Tax incentive, the following requirements must be met:
- A core R&D activity must be intended to create new knowledge, or improved processes, services or goods.
- The R&D is trying to resolve a scientific or technological uncertainty, where experts in the area do not know the answers or possibilities.
- A minimum spend of $50,000 on R&D. However, to ensure that even small businesses can qualify for the R&D tax credit, there is no minimum spend if the business uses an approved research provider. A list of approved research providers can be found on the Inland Revenue website.
- A systematic approach is used to undertake R&D. This involves a methodical approach that is planned, structured and documented, which could involve prototyping, experimentation or analysis that tests and evaluates possible solutions.
- The activities being undertaken in R&D are predominantly taking place in New Zealand. Overseas expenditure is limited to 10% of your total R&D expenditure.
- You own the results of the undertaken R&D or are able to use the results at no extra cost.
From the 2020-21 income year, a new approval process will be introduced. This will make it easier for businesses to understand whether or not they are eligible for the R&D Tax Incentive.
Enrolling for the R&D Tax Incentive can be done through your myIR account under ‘R&D Tax Incentive enrolment.’ After enrolling, you will be able to complete the forms required to claim the tax credit.
