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Definition of R&D

Not everything that a business calls research and development (R&D) will qualify for the research and development tax incentive. Only activities that meet the legislative definition of R&D are eligible.  

Legislative definition of R&D activities (Parliamentary Counsel Office)

Eligible R&D activities must involve core R&D activity. There may also be supporting activities. 

Type of activity Definition
Core activity An activity that has the material purpose of creating new knowledge or new or improved services or goods. It must also attempt to resolve scientific or technological uncertainty
Supporting activity An activity that has the only or main purpose of supporting the core activity

Core R&D activities

Core R&D activities must do all of the following:

  • seek to solve scientific or technological uncertainty
  • seek to create new knowledge, new or improved processes, services or goods
  • use a systematic approach 
  • happen in New Zealand
  • not appear on the list of ineligible R&D activities.

Scientific and technological uncertainty

Scientific and technological uncertainty refers to a knowledge gap in a particular field. If a professional in that field with access to publicly available information does not know if what you want to do is achievable, there may be scientific and technological uncertainty.

Scientific or technological uncertainty can also occur when you know something can be achieved but you do not know how to do it. In this situation your R&D activity may involve the resolution of scientific or technological uncertainty, provided:

  • a professional in that field could not deduce how to create the same product, process or service 
  • there is no publicly available information that would allow a professional to resolve the uncertainty.

Purpose of creating something new or improved

A core activity must have the material purpose of attempting to create new knowledge, new or improved processes, services or goods.

The knowledge, process, services or goods must be new or improved on a worldwide level. You must have looked beyond New Zealand for current information that is publicly available where New Zealand based professionals could be expected to find it. Publicly available does not mean free, it means available on commercial terms.

It is not a requirement that the R&D is successful in creating something new or improved.

Systematic approach

In this context, a systematic approach is a planned and structured way to test possible solutions to a scientific or technological uncertainty. The research standard for a systematic approach is that it is structured and documented in such a way that it can be repeated.

You must keep records of the systematic approach you used and the outcome. You must know and document:

  • what the scientific or technological uncertainty is
  • what possible solution your systematic approach is testing 
  • the actual activities that were undertaken to test the possible solution
  • the results of the tests, analysis or experimentation.

A systematic approach does not include trial and error despite any beneficial results.

Taking place in New Zealand 

Core R&D activities must be performed in New Zealand. The person performing the R&D must be present in New Zealand. Those who use software applications to perform their R&D are still eligible if they meet the other eligibility requirements. 

Supporting activities performed overseas are still eligible. 

Up to 10% of your total eligible expenditure can be for supporting activities conducted overseas, provided the activity is supporting a core activity taking place in New Zealand.

R&D tax incentive guidance: core activities (

Supporting R&D activities

You may have activities that do not qualify as a core activity, perhaps because they are not directly part of the process of evaluating possible solutions to your technological uncertainty. If these activities are required to carry out your core activities, they may be eligible as supporting activities.

Eligible supporting activities must:

  • have the only or main purpose of supporting the core R&D activity
  • be integral to carrying out the core R&D activity.

Supporting activities may also have other uses and benefit other parts of the business. However, their main purpose must be to support the core R&D activity and you must be able to prove this. 

R&D tax incentive guidance: supporting activities (

Ineligible activities

A number of activities are ineligible for the R&D tax incentive.

Example: Activity with R&D as its only or main purpose

A business which develops new fruit cultivars is running a trial which seeks to resolve technological uncertainty and qualifies as core R&D. Work to tend and manage the trial crops is eligible as a supporting R&D activity.

The main purpose of tending and managing the crop is to support the research and this activity qualifies as a supporting activity.

Example: Activity that is not for the only or main purpose

Company K is planning a series of tests to resolve a technological uncertainty related to its emissions. It uses data drawn from its regular environmental monitoring in its planning of the testing process.

The cost of the regular environmental monitoring process cannot be claimed for the tax credit as the activity does not meet the only or main purpose test