The government has announced its new research and development tax incentive package, which is designed to encourage more businesses to increase their R&D expenditure. The key features of the R&D package include:
- A credit rate of 15% (up from the originally proposed rate of 12.5%) which will be available from the beginning of the 2019/20 income year.
- A $120 million cap on eligible expenditure.
- A minimum R&D expenditure threshold of $50,000 per year (previously proposed at $100,000).
- A limited form of refunds for the first year of the scheme that will mirror the IRD’s tax-loss cash-out scheme (this will be replaced by a more comprehensive approach in the scheme’s second year).
- The definition of which activities can qualify as R&D has been broadened for easier access across all sectors. This replaces the need for “scientific method” with the requirement to use “a systematic approach”, but must still resolve scientific or technological uncertainty.
The R&D tax incentive package forms a major part of the government’s plan to raise economy-wide spend on R&D from 1.3% to 2% of GDP over the next 10 years, by encouraging new industries and businesses to innovate. For more information on the incentive package visit the Ministry of Business, Innovation and Employment website.