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Is your business undertaking R&D in New Zealand? You could be eligible for the new 15% R&D Tax Credit Tuesday 23 Jul 2019

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The New Zealand Government has recently introduced a tax incentive to support businesses undertaking eligible R&D. For businesses conducting activities that qualify for the program, expenditure incurred from 1 April 2019 are eligible for the 15% tax credit, part of which may be refundable.

While registration for the program will start from the end of the 2019/20 tax year, there are some steps that can be taken now to ensure that your business can maximise the benefits available.

4 things that you need to be doing now to claim the NZ R&D tax credit

  1. Consider your eligibility
  • All private sector businesses in New Zealand are eligible regardless of legal structure.
  • The minimum R&D spend to lodge a claim is NZ$50,000 and the maximum is NZ$120M (with some exceptions).
  • Eligible R&D costs can include:
    • Salary and wages (including on-costs, travel, etc.) related to conducting the R&D activities
    • Contractor or consultant costs to the extent that they relate to the R&D activities
    • Cost of consumables used in R&D activities
    • Administrative and overhead costs that relate to R&D activities
    • Depreciation for assets used in R&D activities
  • R&D activities must generally be conducted by your business in NZ.
  • The business needs to own (or have the ability to use) the results of the R&D.
  • Recipients of a Callaghan Innovation Growth Grant for the same income year are not eligible.
  1. Consider the eligibility of your R&D activities
  • R&D activities may be eligible where you are:
    • Trying to identify or develop solutions to technical problems, or
    • Trying to develop new products or processes.
  • To be eligible, the R&D activities need to:
    • Be conducted using a systematic approach;
    • Have a material purpose of creating new knowledge or new/improved processes, services, or goods; and
    • Have a material purpose of resolving scientific or technological uncertainty (i.e. uncertainty that is unable to be otherwise resolved on the basis of publicly available information, or by a competent professional in the field).
  • Some activities are excluded from the R&D Tax program, including software development for internal administration purposes.
  1. Document any potential R&D activities as they occur
  • For any R&D activity that you consider may be eligible, the key action to take now will be to document the activities.
  • Record keeping is most effective if these documents are produced contemporaneously with the conduct of the R&D activities.
  • The type of documents that should be retained will vary depending on the industry and type of R&D being conducted. However, this could include:
    • Project reports, minutes of meetings, trial sheets, results analysis, project timelines, e-mails and photographs etc.
  • The key consideration will be whether these documents establish that each of the criteria of an eligible R&D activity has been met, in addition to the duration and scope of the R&D activities (what occurred, when did it occur, who and what was involved, etc.).
  • It is also important to keep records of any costs associated with conducting the R&D activities.
  1. Be ready to register your claim
  • To access the R&D Tax Credit, a R&D supplementary return needs to be filed with Inland Revenue within 30 days of the due date of your business’ income tax return.
  • The R&D supplementary return form has not yet been released, but it will likely require you to explain how your R&D activities meet the eligibility criteria.

R&D tax incentives can be complicated, especially with the introduction of a new program and the strong focus placed on the documentation. It may beneficial to seek the advice of a specialist R&D tax service provider who can guide you in the right direction.

Author: Alana Bayliss


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