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Insight, news and updates from Alliott NZ Chartered Accountants, Auckland New Zealand. The views expressed here are the views of the author and should be discussed in further detail should an article be relevant to your individual circumstances.

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Research & Development Tax Incentive

Written by Vanessa Williams on May 27th, 2019.      0 comments

R&D Tax Incentive

A scheme that will support a wide range of businesses to undertake more R&D and grow NZ’s knowledge economy.

HiRes-3The Government has committed to raising New Zealand’s research and development (R&D) expenditure to 2% of GDP by 2027.

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.

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
  • 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) Bill was passed into law on 7 May. The R&D tax incentive will apply to eligible R&D activities conducted by a business 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 record their R&D expenditure now to ensure their records are ready to file at the end of the tax year.

We encourage businesses to look into whether they might be eligible for the tax incentive by referring to draft guidance issued by Inland Revenue. This guidance will be finalised in the weeks following the Bill’s third reading.

For year one of the R&D tax incentive there is limited refundability available for smaller businesses with cash flow challenges. There is work underway on a more developed refundability process to support R&D businesses with limited tax liability and the Government is committed to having a decision in place for year two of the scheme.

Growing your business

Positioning for growth requires a clear vision of the future, a start and end point and the ability to track your progress and alter course along the way. At Alliott NZ we understand that you might not have the knowledge or expertise to achieve this, but we do. We also have an extensive range of tools available to help you successfully grow your business. Call our team of accountants and business advisers in Auckland on 09 520 9200.

More information about the R&D tax incentive is on MBIE’s website.

Source: Callaghan Innovation

 

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