R&D tax credit – are you eligible?

Dear Client,
You will be aware the government has (re)-introduced a Research & Development tax initiative. This applies from the income year beginning on or after 1 April 2019 which means that it is already in effect for most taxpayers.

In a nutshell, the R&D tax incentive provides a tax credit at a rate of 15 per cent of eligible R&D to New Zealand taxpayers who have spent at least $50,000 in eligible R&D expenditure during the year (up to $120 million).

If you qualify, you may be entitled to a 15 per cent tax credit on the R&D expenditure. Spend under $50,000 per year may still be eligible if you use an approved research provider to do R&D on your behalf.

If you are have tax losses, you may benefit from a cash refund of your R&D tax credits. This is possible up to $255,000 of eligible tax credits. Otherwise, excess R&D tax credits can be carried forward to offset your tax in future years.

As always there are some rules and conditions one of which is that the R&D activities must meet the eligibility criteria.

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, and
  • use a systematic approach.
  • be done in New Zealand, but up to 10 per cent of total eligible spend can relate to R&D done overseas.

The majority of New Zealand SME businesses are involved in some R&D activities to varying degrees.

This is especially the case for all hi-tech, bio, agri, ICT; manufacturers, and many others.

In fact it might be said that you do qualify (until you do not).

The R&D tax incentive represents a very positive move by the government to encourage business innovation and research and development.

Given this tax credit / refund incentive, and its broader eligibility basis than previously, you are strongly encouraged to look at how you may benefit!

Please get in touch with us if you wish to discuss this further.