The R&D tax credit has been repealed, effective from the 2009-10 income year. It is still available for qualifying expenditure on R&D activities carried out in the 2008-09 income year. Find out more about the R&D tax credit repeal >
Tax agents: To file a detailed statement on behalf of a client, you must upgrade your online services user ID to access your client's detailed statement. For help, ask the online services support person or administrator in your office, or contact the R&D tax credit team.
How the R&D tax credit works
The R&D tax credit applies for the 2008-09 income year.
The credit applies at the rate of 15% of eligible R&D expenditure or depreciation loss in an income year.
The R&D tax credit operates on a self-assessment basis. This means claimants are responsible for meeting the key eligibility criteria for the tax credit:
- their business is eligible
- any R&D activity they have undertaken is eligible, and
- any R&D expenditure or depreciation loss is eligible.
Find out if your business is eligible.
New Zealand legislation
Income Tax Act 2007:
- LH 1-LH 17
- schedule 21, parts A, B and C
Purpose
A 15% (15 cents in each dollar) tax credit was introduced for research and development (R&D) activities carried out by New Zealand businesses, from the 2008-2009 income year.
The government has repealed this credit from the 2009-2010 income year
How the R&D tax credit works
You claim the tax credit in your annual income tax return and provide a supporting detailed statement. You can either complete this yourself, or have your tax agent complete it for you.
To claim the credit, calculate your income tax liability in the usual way then subtract the amount of the credit. If any tax credit remains, it offsets other liabilities. After this, any surplus credit is then available for transfer or refund.
The R&D tax credit is delivered and administered through the tax system, forming part of your income tax assessment. Income resulting from an R&D tax credit is excluded income.
Who is eligible?
R&D does not need to be conducted in a laboratory or even be successful to be eligible for the tax credit. The definition of R&D for the tax credit is however narrower than R&D as it is understood in some other contexts. It differs from:
- the rules governing what R&D can be deducted by businesses for tax purposes, and
- the criteria used by agencies that give R&D grants.
To receive the tax credit you must:
- be an eligible business, and
- undertake eligible R&D activities, and
- have eligible expenses.
Find out if your business is eligible.
| If you're a ... | then ... |
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you may be eligible for the tax credit. |
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you're not eligible for the tax credit. |
Note
Eligible business can not claim the tax credit for:
- R&D activities done in partnership with an ineligible business.
You're an eligible business if you:
- control the R&D
- bear the financial risk, and
- own the results.
Find out more about the 'on behalf of' criteria.
What R&D activities are eligible?
To be eligible for the tax credit, your R&D activities must include systematic, investigative and experimental (SIE) activities carried out to acquire new knowledge or create new or improved materials, products, devices, processes or services and that either:
- are intended to achieve an advance in science or technology by resolving scientific or technological uncertainty, or
- have an appreciable element of novelty.
Note
- Uncertainty exists when knowledge about whether or not a matter is scientifically or technologically possible, or how it can be achieved in practice, is not publicly available or deducible by a competent professional working in the field.
- Novelty means the development of technology or a new use of existing technology by comparison with knowledge of the technology that is publicly available on a reasonably accessible worldwide basis.
You may also have other eligible activities that are wholly or mainly required for, and integral to, the SIE activities - these are referred to as support activities.
There are also some types of R&D (for example marketing, social science research) that are not eligible for the tax credit.
Find out what R&D activities are eligible.
What is eligible expenditure?
Eligible expenditure must exceed $20,000, unless:
- you're using a listed research provider (LRP), or
- the business has only been eligible for part of the year (for example, the business commenced or ceased trading during the year), in which case the $20,000 minimum threshold is pro-rated.
Note
Listed research providers (LRPs) undertake R&D activities for other, non-associated organisations that are systematic, investigative and experimental (SIE).
Subject to some exceptions, expenditure must be deductible for income tax purposes to be eligible for the tax credit.
The following expenditure on eligible R&D activities may qualify for the tax credit:
- salaries and other remuneration of employees doing R&D
- depreciation of tangible assets used wholly or mainly in doing R&D
- costs of staff training, recruitment, relocation and travel incurred as a direct result of R&D
- the cost of materials used in prototypes
- overheads for administration, personnel, repairs and maintenance, cleaning and security, rates, utilities, insurance and leasing of buildings, plant and equipment
- the cost of items used, and the net cost of items processed or transformed, in R&D activities, and
- payments to an entity or person conducting R&D on behalf of the claimant.
There are some types of expenditure that are not eligible.
Find out what expenditure is eligible and what is excluded.
How do you claim?
You claim the tax credit:
- as part of your annual income tax return, and
- you also need to file a supporting R&D tax credit detailed statement, which must be completed online, no later than 30 days after the date your business's income tax return is due.
What happens if your R&D claim isn't accepted?
If your R&D claim is rejected, or reassessed and reduced by us, use of money interest and penalties apply in the normal way.
What next?
Work out if you could get the R&D tax credit.
If you think your R&D activity might be eligible, then:
- assess your eligibility,
- find out what to do when planning and running R&D activities, and
- find out what to do to when claiming the R&D tax credit and filing your tax return.
Date published: 02 Nov 2009
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