Money your business spends on research and development (R&D) may be eligible for a 15 per cent tax credit up to $120 millions.
- The R&D tax incentive offers a tax credit at a rate of 15 per cent of eligible R&D expenditures, up to $120 million.
- Businesses currently engaged in R&D must apply and obtain approval for their R&D activities to be eligible to claim the credit.
Register for the research and development tax incentive
Is Your Business Eligible for Research & development?
To access the tax incentive, you generally must spend at least $50,000 a year on eligible R&D.
Spending less than $50,000 a year may still be eligible if an approved research provider conducts the R&D on your behalf.
Approved research provider list
Any business that has applied for the R&D Tax Incentive (RDTI) can request in-year payments to receive support closer to when the R&D costs are incurred, instead of waiting for the RDTI tax credit to be issued.
Qualifying R&D Activities
Eligible R&D activities must:
- Be performed to acquire new knowledge, or create a new or improved process, service, or good.
- Seek to resolve a scientific or technological uncertainty.
- Use a systematic approach.
To qualify for the R&D tax incentive, your research must aim to resolve a scientific or technological uncertainty. This means you must go beyond merely applying existing knowledge in a new context; you need to tackle a challenging problem or undertake an endeavour that requires a thorough investigative process to find a solution, something that professionals in the field would not know how to do without such an investigation.
Eligible R&D activities must be conducted in New Zealand, although up to 10 per cent of the total eligible expenditure can be attributed to R&D performed overseas.
R&D tax incentive eligibility tool
Use the Inland Revenue tool to help you better understand if your organisation and activities are eligible for the R&D tax incentive.
Eligibility for the research and development tax incentive — Inland Revenue
Case Study: Existing Knowledge
James and Elena design and build houses. In response to market demand, they are improving their designs to achieve passive house energy efficient standards. Their designs are new and require them to do a considerable amount of background research. James and Elena are unsure if they will be commercially successful or not.
James and Elena use a systematic approach and check each stage of their first house design to ensure it complies with the passive house standards.
The principles for passive house design are well understood by competent professionals in that specialist field, and there is no scientific or technological uncertainty in what James and Elena are doing.
Because of the absence of scientific or technological uncertainty, this type of adaptation or development does not qualify as an eligible R&D activity.
Consider Your Spend Breakdown
If you spend $50,000 or more a year on eligible R&D activities, you may qualify for the tax incentive.
Claims for spending less than $50,000 a year can only include eligible expenditures on approved research providers doing R&D on your behalf.
Case Study: R&D Spend Breakdown
Alex’s R&D spend is $35,000 with an approved research provider. The approved research provider ensures that none of the R&D spend relates to ineligible activities or expenditures.
Alex also spends $20,000 on eligible R&D performed in-house.
His total eligible R&D spend equals $55,000, which meets the minimum threshold of $50,000. Alex’s total R&D spend of $55,000 may be eligible for the tax incentive.
Recording Your R&D Spend
Record your R&D expenditures throughout the year to ensure your records are ready for filing at the end of the tax year.
Keep records that:
- Show your business is eligible.
- Show your R&D activity meets the eligibility criteria.
- Show that your expenditure was incurred on eligible R&D activities and was of an eligible expenditure type.
Regardless of whether you conduct your R&D activities in-house or through a contractor, including an approved research provider, you are ultimately responsible for ensuring you can access the necessary records to support your claim.
You must also ensure that your claim includes only eligible expenditures, even when using an approved research provider.
Inland Revenue provides guidance on how to maintain records and offers more information about the R&D tax incentive.
Research and development tax credit guidance
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