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

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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.