Has your business been making the most of the Government incentives for R&D?

By Brendan Ng and Jason Yang

A milestone $10 billion of R&D supported through Government incentives shows that businesses are taking advantage of the government support through the Research and Development Tax Incentive (RDTI) scheme, using it to innovate and expand their R&D capability. With the scheme only continuing to grow, it could be worth considering whether your organisation is leaving money on the table which could expand the scope of your R&D or be reinvested into further R&D workstreams (more on this further below). We are still regularly coming across businesses who are doing good R&D but haven’t realised that they could be eligible for the RDTI. 

$10 billion of R&D supported

In a recent release, the Government has reported that the RDTI has provided businesses undertaking more than $10 billion of R&D with support, with Science, Technology and Innovation Minister Penny Simmonds noting that “This milestone reflects the speed with which Kiwi businesses are using the scheme. It took around three years for the scheme to support its first $1 billion of R&D activity, and fewer than four more years to reach $10 billion. That growth shows the increasingly important role RDTI is playing in supporting business investment in R&D.”

Importantly, it is noted that new businesses are signing up for the scheme, with Minister Simmonds stating “The latest application round shows that momentum continuing. Following the 30 June application deadline, initial results show record rates of application. More new businesses have enrolled for the scheme this year than for any year since 2021. Crucially, the majority of those new enrolees have been small businesses.”

This news follows on from an independent report on the RDTI, showing that five years on from its implementation there have been overwhelmingly positive reactions to the scheme. That evaluation showed that, for every dollar of RDTI support provided by the Government, businesses have invested an estimated $1.40 more in R&D than they otherwise would have, showing that the RDTI is enabling businesses to simply do more.

Can my business access the scheme?

So with a growing number of businesses accessing the scheme and enjoying the benefits, what is the RDTI and can your business claim it?

The RDTI is a 15% tax credit that eligible businesses can access in relation to their eligible R&D expenditure, essentially getting back 15c for every dollar that is spent on R&D. To be eligible to claim, businesses must be undertaking R&D in New Zealand that:

• Seeks to resolve scientific or technological uncertainty
• Aims to create new knowledge, or new or improved processes, services or goods
• Follows a systematic approach

In practice, this covers a broad range of activities, ranging from the more traditional ‘white lab coat’ R&D to the fast growing area of software development. The industries which are making claims cover the broad spectrum of New Zealand businesses, with innovation occurring in all corners of New Zealand.

While the range of R&D activity that can be captured is broad, there are nuances in the form of certain exclusions, so please reach out if you think you are undertaking something that may be eligible and Deloitte can help guide you through.  

How do I claim?

If your business may be undertaking R&D activity, you will first need to get it written up and pre-approved by IRD/MBIE by way of General Approval application. Once this approval is received, the eligible costs can be claimed with Inland Revenue. Eligible costs include employee time, contractors, overheads, direct R&D costs, depreciation on assets used in R&D and other ancillary costs that are associated with the R&D activity.

Depending on the circumstances, the 15% credit on those eligible costs is either applied to your business’ tax liability or refunded in cash, allowing businesses to undertake further innovation and grow their business. The Government has also recently announced a new scheme that will assist with cashflow, introducing in-year payments of the 15% credit. The details of this will be released in due course, but a similar scheme has previously been used in the past.

If you have any questions on the RDTI and whether your business would qualify for the 15% tax credit, please get in touch with your usual Deloitte advisor.