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Budget 2024 | The Government has announced proposed changes to personal income tax, the independent earner tax credit, in-work tax credit, the minimum family tax credit and the interest rate charged for overseas based student loans. They have also provided more information on FamilyBoost. Find out more:

The research and development tax incentive (RDTI) offers a tax credit at the rate of 15% of eligible R&D eligible expenditure or loss up to $120 million. It operates by offsetting tax to pay and in some circumstances it is refundable.

To claim the tax incentive, you must spend at least $50,000 a year on eligible R&D. You might be eligible if you spend less than $50,000 and use an approved research provider.

Reading our RDTI guides will help you to choose the right process and submit accurate information to support your applications.

Receiving your R&D tax credit

When applying tax credits against your income tax liability, your R&D tax credits apply after imputation credits but before refundable tax credits. Your tax credits are used in the following order:

  1. Non-refundable tax credits
  2. Tax credits for supplementary dividends
  3. Imputation credits
  4. R&D tax credits from a previous tax year
  5. R&D tax credits from the current tax year
  6. Refundable tax credits

Any R&D tax credits that are leftover can be carried into your next income year.

If you are a company, you may only carry your R&D tax credits forward if you meet the shareholder continuity requirements.

Getting a refund

The Government has brought forward the proposed changes to refundability rules. You can now apply these new rules to R&D claims for year 1 of these changes, the 2019-20 tax year.

Limited refundability rules

If you're a company doing eligible R&D, you may be able to get an R&D tax credit refund of up to $255,000. This equals $1.7 million of eligible R&D expenditure if you:

  • are in a tax loss position
  • are in a tax paying position but have surplus tax credits
  • satisfy the R&D tax loss cash-out corporate eligibility and wage intensity criteria
  • do not derive exempt income and are not associated with anyone who derives exempt income.
Exempt income you're allowed

If you're a company resident in New Zealand, you and the associated person are allowed to derive income from dividends, and still be eligible for a refund, if they are from:

  • foreign companies
  • New Zealand wholly-owned groups.

You'll need to check sections CW 9 and CW 10 of the Income Tax Act 2007 for the full criteria.

Income Tax Act - Subpart CW - Exempt income (Parliamentary Counsel Office)

Broader refundability rules

The broader refundability rules apply by default to all claimants in the 2019-20 income year. However, businesses have the option of using the limited refundability rules of year 1 if they prefer.

The broader refundability rules carry forward the previous criteria, but do not include the:

  • R&D wage intensity method
  • $255,000 cap, replacing it with one based on labour-related costs.

Filing an R&D supplementary return

When filing an R&D supplementary return, we will ask the business to confirm which set of refundability rules they're applying to its claim. For more information, see our Research and Development Tax Incentive: Guidance - IR1240 and Research and development supplementary return guide - IR1060.

Refundability rules for 2020-21 onwards

All businesses will have to use the broader refundability rules from the 2020-21 income year onwards.

Wage intensity criteria

You must also satisfy the wage intensity criteria In order to satisfy this criteria, 20% or more of your labour costs must relate to R&D. If you are part of a group of companies, the wage intensity amount calculated for your group must be at least 20%.

Last updated: 21 Mar 2024
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