Updated R&D tax incentive welcomed

Both TechNZ and BusinessNZ have welcomed changes to the government’s RD tax incentive scheme extending benefits to companies that are not turning a profit.

NZTech chief executive Graeme Muller said the changes were “a great step in the right direction.” BusinessNZ chief executive Kirk Hope said the new incentive would provide innovation incentives to a broader range of businesses.

"In the past, small start-ups and businesses engaging in the risky process of developing something new were not eligible for RD tax relief if they were not making a profit,” he said.

"This new incentive will help foster innovation among currently loss-making businesses and create a fairer scheme for greater innovation in the New Zealand economy generally.”

The minister of research, science and innovation, Dr Megan Woods said the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill, introduced to Parliament in late June, would mean more businesses claiming the RD Tax Incentive would be eligible for refunds of their RD tax credits from the 2020/2021 tax year onwards.

Currently, a pre-profit firm in year one of the scheme would be able to receive a maximum pay-out of $255,000 under the measures for limited refundability.

Under the revised scheme, a pre-profit start-up investing $2 million in eligible RD would be entitled to get back $300,000 of its investment in cash – provided it met the broader conditions, the minister said.

Businesses will be able register their intent to claim RD tax credits under the scheme later this month.

The move is the latest in the government’s drive to increase RD expenditure to two percent of GDP over 10 years. It follows changes to the scheme announced in October 2018 that lifted the incentive from 12.5 percent to 15 percent of eligible RD spending and dropped the RD spending threshold to $50,000 from $100,000.

According to TechNZ there are 20,000 firms in the tech sector, most of them small businesses, employing about 100,000 people, contributing around $16 billion to GDP and close to $7 billion in exports.

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