Government ramps up R&D tax incentive

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 after extensive consultation with businesses.

The consultation process prompted significant changes to the tax incentive originally proposed. The rate will be higher, the threshold lower, and the definition more inclusive.

The key changes include:

  • A credit rate of 15 per cent, a $120 million cap on eligible expenditure, and a minimum R&D expenditure threshold of $50,000 per year
  • The inclusion of State Owned Enterprises, industry research cooperatives (including levy bodies), and minority-owned subsidiaries of Crown Research Institutes, Tertiary Education Organisations and District Health Boards
  • A definition of R&D that ensures the credit can be accessed more easily across all sectors, including the technology sector
  • A limited form of refundable tax credits which will mirror the R&D tax-loss cash-out scheme run by Inland Revenue.

The Ministers said the Government had set aside $1 billion for this incentive.

Work to increase R&D spending to 2 per cent of GDP over 10 years was part of the Coalition Agreement between Labour and New Zealand First.

Revenue Minister Stuart Nash said a balance has been struck 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.”

Mr Nash assured 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.

The Ministry of Business, Innovation and Employment’s website provides further information  HERE. 

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R&D tax incentive update: Minister says legislation will be introduced in October

Reporting progress on the Government’s plan to introduce a research and development (R&D) tax incentive, Research, Science and Innovation Minister Megan Woods reiterates the aim to lift New Zealand’s economy-wide spend on R&D from 1.3% to 2% of GDP over the next 10 years. The tax incentive will be a key lever in reaching this goal.After a consultation period, officials are now producing final recommendations on the design of the scheme.

There will be further opportunities for people to have their say on the design of the R&D tax incentive during the select committee process later this year.

Legislation will be introduced in October for the R&D tax incentive to be in place by 1 April 2019. Eligible businesses paying tax will be able to benefit from this policy from day one.

Over time, the Government intends to have a full package of support for New Zealand’s Innovation system, including support for start-ups.

“We recognise it is vital to have the right kinds of support in place for pre-profit businesses that are in tax loss or those that have insufficient taxable income to benefit from a tax credit,” Dr Woods said.

She has noted concerns that R&D-intensive firms and start-ups would not be able to benefit from the incentive.

The policy issues involved in supporting companies in tax loss through a tax incentive were complex, she said, “but we are committed to having a solution in place by April 2020”.

In the meantime start-ups and businesses in tax loss can continue to get support from the range of grants and incubators from Callaghan Innovation.

Source: Minister for Research, Science and Innovation

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.