The Coalition Government has announced improvements to the R&D Tax Incentive to ensure more businesses receive financial support to invest in new ideas.
Many businesses have found their access to tax credits under the Government’s $1 billion R&D scheme limited because they’re yet to turn a profit which is typical for a new business. However, many effective R&D activity is delivered by start-ups and pre-profit businesses.
The Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill, means more businesses claiming the R&D Tax Incentive will be eligible for refunds of their R&D tax credits from the 2020/2021 tax year onwards.
A Tax Incentive in the form of a tax credit benefits businesses in profit, but without refundability it is of limited use for pre-profit businesses or businesses in loss.
Under the Government’s plan, refundable tax credits would generally be available up to the amount of payroll tax paid by the business in the same year. At the moment a pre-profit firm in year one of the scheme would only be able to receive a maximum pay-out of $255,000 under the measures for limited refundability.
The Coalition Government has set the ambitious target of raising New Zealand’s R&D expenditure to 2% of GDP over 10 years, and this change is part of that plan. It is part of a wider package of government support for New Zealand’s innovation system, which includes initiatives like the Callaghan Innovation administered Project Grants and the Technology Incubator Programme.
Enrolment for the Incentive will open in July, through which businesses can register their intent to claim R&D tax credits and request further information.