What is the R&D Tax Incentive (RDTI)?

Since 2019, NZ businesses conducting R&D can access the new Research and Development Tax Incentive (RDTI). The RDTI program offers tax offsets worth up to 15% of your acceptable R&D expenses. In some cases, approved offsets could be paid to you as a cash refund. The paperwork and process might seem daunting, but the financial benefit makes it worthwhile.

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Although less widely promoted than the RDTI, the R&D Loss Credit is also available to most early stage, private-sector businesses.

If your business is pre-revenue, growing rapidly, or heavily investing in early R&D, you might be making a net loss. The R&D Loss Tax Credit gives you up to 28% of those losses back as a refund. And you get the refund for the same tax year, to improve your cash flow and allow you to continue investing in R&D.

Can I Get R&D Loss Credits?

Your company must reside in NZ, be making a loss, and not be majority owned by the Crown. With the aim of targeting early-stage innovators, you can’t yet be listed on the stock exchange, and at least 20% of your labour bill (including some contractor costs) must be for R&D. You’ll also need to own the intellectual property or know-how resulting from the R&D.

How Do R&D Loss Credits Work?

A tax loss normally generates tax credits to lower your taxes in future, profitable years. But that can leave you uncomfortably out of pocket in the meantime. Instead, the R&D Loss Credits scheme pays you the credits as a refund, in the same year. The amount of refund is up to 28% of your tax loss but depends on your exact R&D costs and R&D labour. You need a process to ensure you claim the right costs, as ‘R&D’ is defined differently for this program. With BlueRock as your partner, you can rest assured you’ll be accessing your full entitlement from both programs.

How Much Could I Get Through RDTI and other R&D Tax Programs?

Each tax program has detailed rules, conditions, and exceptions that need to be carefully considered. It’s even possible that some of your R&D qualifies for only one program and not the other. But the big picture is, you can claim:

• Up to 15% of your R&D costs through the R&D Tax Incentive.
• Up to 28% of your business loss (from R&D) through the R&D Loss Tax Credit.

How Can BlueRock Help with RDTI?

Here’s how BlueRock’s grants and tax specialists can help you access the R&D Tax Incentives

• Free consultations for new clients
• Independent pre-assessment advice, before you approach the regulators
• Confidential workshop to review your innovation projects and expenses
• Estimates of credit/refund benefits under both programs
• Writing your detailed technical narratives needed to pass the R&D tests
• Submitting your application and supporting liaison with the regulators.
• Preparing the supporting documentation for your tax return (IRD’s “#1 mistake” is omitting this)
• Reviewing your end-of-year accounts to calculate final eligible R&D expenditure (claiming ineligible costs is mistake #2!)
• Training key staff on R&D eligibility and record-keeping processes
• Ongoing regular catchups to ensure you access your full entitlements, every year.