Important:
- To claim the R&D tax credit, you must submit a detailed statement online.
- In most instances, the last date for submitting a detailed statement was April 30 2010. Find out more
Quality control and routine testing
Excluded activities
Activities excluded from being systematic, investigative and experimental (SIE) activities are quality control, or routine testing, of:
- materials
- products
- devices
- processes
- services.
Example - routine testing
Farmer A is not confident that industry accepted software he is using to guide on-farm practices to manage nitrogen run-off is applicable for his situation. He is also concerned that nitrogen run-off from his farm into the local stream is above acceptable environmental levels set by the regional council.
He places meters at locations that are most likely to detect the impact of his farm management systems on nitrogen run-off. From these, he collects measurement data both to validate the software for his own situation, and to compare with the council's environmental model(s) and assess his own compliance.
These activities are routine testing activities to guide farm management decisions. They are neither SIE activities, nor support activities wholly or mainly required for eligible SIE activities.
Note: Examples are simplified. You should check the detailed R&D information and/or consult a professional advisor.
Can these activities be support activities?
Quality control or testing supporting an eligible R&D activity may be eligible as a support activity. The testing would need to be all of the following:
- wholly or mainly for the purpose of the SIE activities
- required for the SIE activities
- integral to the SIE activities.
Testing that is a support activity during eligible R&D may become routine testing, at which point it is no longer eligible.
The key question is "when did the eligible R&D finish?" After that point, testing is no longer wholly or mainly for the purpose of the SIE activities. Find out more about determining when eligible R&D activities start and finish.
Example - routine testing
A company develops a product significantly different from its existing range. During the development process, which meets the definition as eligible R&D, testing of the product against the technological objectives is an eligible activity.
The company is satisfied that the technological objectives have been met and moves into pre-production planning and set-up. In its production planning it decides on a more intensive programme of quality control and testing than it uses for its existing products. The decision reflects its lack of experience with the new product line. Despite the more intensive testing it is no longer an eligible support activity as its main purpose is to support production of the new product.
Note: Examples are simplified. You should check the detailed R&D information and/or consult your professional advisor.
R&D in quality control or testing
The development of new techniques or methods for quality control and/or testing could give rise to eligible R&D.
New Zealand legislation
Income Tax Act 2007
- schedule 21 part C, clause 4
- LH 7(1)(b)
- LH 7(2)(b)
Date published: 30 Sep 2008
Back to top