On 19 April, New Zealand Government released
the Research and Development (R&D) Tax Incentive Discussion Document for
public consultation. The announced was jointly made by Research, Science and
Innovation Minister Dr Megan Woods and Revenue Minister Stuart Nash.
Over the next six weeks, the Ministry of Business, Innovation and Employment
(MBIE), with support from Inland Revenue
and Callaghan Innovation,
will be actively seeking feedback on specific aspects of this proposal to
ensure the R&D tax incentive is fit for purpose.
Currently, New Zealand’s gross expenditure on R&D is
1.28% of GDP, lower than the OECD average of 2.3%. Business expenditure
on R&D has been steadily rising, but at 0.64% of GDP it is well below
the OECD average of 1.65%.
According to Minister Woods, the New Zealand Government is
committed to increase business R&D expenditure to 2% of GDP over ten years.
“Growing R&D is a key lever in diversifying the economy
and creating new industries, businesses, and highly skilled
jobs. Sustained increases in government investment will be important, but
we will also need to see an increasing contribution from the private sector,
specifically in businesses undertaking R&D,” Minister Woods said.
“This consultation document is the first step we will take
together in achieving this ambitious goal,” she added.
For businesses, R&D is recognised as a key indicator of
innovation, which enhances their ability to be successful in changing markets.
More broadly, it provides for the diversification of the economy by encouraging
new industries, and companies, new jobs and new ways of doing business.
Revenue Minister Stuart Nash says the R&D tax incentive
will have broad reach across the economy, and will enable businesses of all
sizes to undertake R&D.
An R&D tax incentive will offer a greater element of
certainty to businesses. It will be a simpler process, and will open access to
those that have either struggled to access support or have been shut out of the
process in the past. The system should stand the test of time and give
businesses the consistency and confidence they need to succeed.
“There needs to be a careful approach to establishing a tax
incentive mechanism of this nature. The discussion document sets out the main
design and technical features proposed for the R&D tax incentive,” said
The proposed R&D Tax Incentive has been designed to
provide easily accessible support to a broad range of businesses, and to do so
in a fiscally responsible way while also maintaining trust and confidence in
the tax system.
The proposed mechanism for providing the R&D Tax
Incentive is a 12.5% tax credit on eligible expenditure will be available to
business doing R&D in New Zealand. The credit will be available for
eligible expenditure incurred from 1 April 2019. A business will need to
spend a minimum of NZ$100,000 on eligible expenditure, within one year, to
qualify for the Tax Incentive.