R&D tax incentive package announced

The Government announced its R&D tax incentive package this morning.

Key features include:

- a credit rate of 15%;
- a $120 million cap on eligible expenditure;
- a minimum R&D spending threshold of $50,000 per year; and
- a limited form of refund in its first year that mirrors Inland Revenue’s tax-loss cash out scheme (to be replaced by a more comprehensive approach in the scheme’s second year).

A Bill is planned for introduction into Parliament later this month or in early November.

For more information see the Ministers’ media statement and the Ministry of Business, Innovation & Employment’s website.

Hon Megan Woods
Minister of Research, Science and Innovation

Hon Stuart Nash
Minister of Revenue

3 October 2018

Media statement

Government ramps up R&D tax incentive

More generous tax incentive scheme announced following extensive consultation with business.

The Coalition Government is backing businesses to succeed with a new tax incentive that aims to unlock further spending on research and development.

Research, Science and Innovation Minister Megan Woods and Revenue Minister Stuart Nash today announced the design of the research and development (R&D) tax incentive following extensive consultation with businesses.

“We listened to the business community. We ran a thorough consultation process and as a result we have made significant changes to the tax incentive originally proposed. The rate will be higher, the threshold lower, and the definition more inclusive.

“This is a huge opportunity for businesses to invest in R&D, which will help us increase our productivity and boost wages.

“We pride ourselves on being an innovative country, but our spending on R&D lags behind many of our international competitors, and this Government is not content to languish at the bottom of the table. That’s why we’ve set aside $1 billion for this incentive.

“Work to increase R&D spending to two per cent of GDP over 10 years was part of the Coalition Agreement between Labour and New Zealand First. This incentive puts us on the path to achieving this goal,” said Megan Woods

Revenue Minister Stuart Nash said these features struck a balance between including as many businesses as possible in the scheme, and upholding the integrity of New Zealand’s tax system.

“We have learned from international best practice how to incentivise R&D expenditure and retain trust and confidence in the tax system. The new policy meets the rigour of international schemes, and will support businesses to undertake genuine R&D.

“We received a lot of feedback from businesses that it was particularly important to include a form of refundable tax credits for start-ups and loss making businesses in the first year of the tax incentive. This is why we have introduced a temporary measure that will mirror the current R&D tax-loss cash-out scheme.

“I can assure all businesses that having a more comprehensive form of refunds in the R&D tax incentive is a high priority to have in place for the 2020 tax year,” said Stuart Nash.