Budget provides $1 billion for Govt’s R&D tax incentive

The Coalition Government is delivering on its plan to support a stronger and more productive economy with higher wages by injecting $1 billion into business research and development (R&D), Research, Science and Innovation Minister Megan Woods and Revenue Minister Stuart Nash say in a Budget press statement.

New Zealand spends just 1.3 per cent of GDP on R&D, whereas the OECD average is 2.4 per cent, Dr Woods says.

“We need new ideas, innovation and new ways of looking at the world if our businesses are to build a more productive economy,” she says.

“That’s why this Government is putting $1.0 billion of operating expenditure over four years on the table to finance an R&D tax incentive, giving eligible businesses 12.5 cents back for every dollar they spend on R&D. This funding will be available to all businesses spending more than $100,000 a year on R&D.

“This system will help us transition away from the current Growth Grants model, which is available to a narrower range of firms. This represents a significant increase in the amount available to help smart Kiwi businesses to innovate.”

Mr Nash says the design of the R&D tax incentive is currently out for public consultation and productive conversations are being held with businesses around the country.

The billion-dollar boost for innovation would make the New Zealand economy stronger and more productive, he says.

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Lifting R&D investment: Govt releases tax incentive discussion document

Research, Science and Innovation Minister Megan Woods and Revenue Minister Stuart Nash today have released the Research and Development Tax Incentive Discussion Document for public consultation.

The Government is committed through its coalition agreement with New Zealand First to increasing business R&D expenditure to 2 per cent of GDP over 10 years, Ms Woods said in a press statement. The  consultation document is the first step being taken to achieve that goal.

New Zealand’s gross expenditure on R&D is 1.28 per cent of GDP – much lower than the OECD average of 2.38 per cent.

“Growing R&D is a key lever in diversifying the economy and creating new industries, businesses, and highly skilled jobs,” Ms Woods said.

“Sustained increases in government investment will be important, but we will also need to see an increasing contribution from the private sector, specifically in businesses undertaking R&D.

“That’s why we’re introducing an R&D tax incentive as a significant addition to the system of government support for New Zealand’s innovation system.”

Revenue Minister Stuart Nash says the R&D tax incentive will have broad reach across the economy and will enable businesses of all sizes to undertake R&D.

“An R&D tax incentive will offer a greater element of certainty to businesses,” he says.

“It will be a simpler process, and will open access to those that have either struggled to access support or have been shut out of the process in the past. The system should stand the test of time and give businesses the consistency and confidence they need to succeed.”

Establishing a tax incentive mechanism of this nature had to be done carefully, Mr Nash says.

The discussion document sets out the main design and technical features proposed for the R&D tax incentive.

Over the next six weeks, the Ministry of Business, Innovation and Employment, with support from Inland Revenue and Callaghan Innovation, will be seeking feedback on specific aspects of this proposal to ensure the R&D tax incentive is fit for purpose.

AgScience readers can visit MBIE’s website to read the R&D tax incentive discussion document and make a submission HERE. 

Source: Government press statement