New Zealand Government Incentives

In Tax

Across the OECD, governments are increasingly using a range of incentive programs to foster innovation and increase business competitiveness. This includes tax incentives, business concessions and direct grant funding. Our team of R&D tax professionals combine experience in science and engineering technical fields with specialist grant and incentive program knowledge to help you navigate the programs on offer in the jurisdictions you operate.

Related topics Tax Tax function operations

What EY can do for you

We will work with you to understand your business’ operations, strategy and projects in order to assess which government incentive programs are right for you. We can assist at all stages of the process; from project identification and scoping, preparing applications, preparing project costings, through to ongoing compliance and verification.

  • R&D Tax Incentive

    The New Zealand Government’s new flagship incentive programme provides a 15% tax credit for qualifying expenditure on eligible R&D activities. Tax credits can be used to offset income tax payable, with any unused tax credits being refunded. Certain refund caps apply.

    Qualifying core R&D activities must:

    • Be conducted using a systematic approach; and
    • Have a purpose of creating new knowledge or new or improved goods, services or processes; and
    • Have the intent to resolve scientific or technological uncertainty; and
    • Occur in New Zealand.

    Other activities that are integral to and have the main purpose of supporting the core R&D activity may also qualify.

    To ensure that your R&D claim is robust and that you are claiming your full entitlement, it is important to have robust activity documentation and expenditure tracking systems in place. EY can assist with this process by facilitating workshops, advising on the design and implementation of systems for tracking and recording projects, or guiding you through the stages of the application process. EY can tailor our approach to fit your needs.

  • Transitioning from a Growth Grant?

    The Callaghan Innovation Growth Grant is being phased out and will be replaced by the R&D tax incentive. Businesses cannot generally access both programs in the same income year, therefore, it is crucial for Growth Grant recipients to determine which program best suits their needs and to create a transition plan. While all Growth Grants will end by 31 March 2021, some businesses may wish to transition earlier. Some key transition indicators to consider include:

    • Total R&D expenditure
    • Overseas activities and expenditure
    • Activity eligibility under each program
    • Your policy around capitalisation of intangible development expenses
    • Cash flow requirements
    • Other commercial arrangements

    If you would like to assess which program is best for you or if you want help with developing a transition plan, EY is here to assist and discuss your options.

  • R&D Loss Tax Credit

    The R&D loss tax credit provides certain R&D-intensive companies immediate access to a proportion of their tax losses, rather than carrying them forward to offset future profits. This incentive helps companies to improve cashflow when it’s needed the most.

    To be eligible for the credit, a company must:

    • Be a New Zealand company undertaking R&D in New Zealand; and
    • Own the IP the R&D generates; and
    • Incur eligible R&D expenditure in the tax year; and
    • Spent at least 20% of their global labour expenses on R&D in New Zealand; and
    • Have a net loss in the tax year; and
    • Meet certain corporate eligibility requirements.

    Companies may be eligible to claim for both the R&D loss tax credit and the R&D tax incentive, leading to a combined cash benefit of up to 43% of R&D expenditure. However, care must be taken as each program has a different definition of “R&D”. EY can support you in identifying which R&D activities can be claimed under each program.

  • Process & Documentation

    Keeping adequate documentation to substantiate any tax or grant claim is critical. However, accurately tracking the work carried out and setting up processes for record keeping can add an additional compliance burden, potentially distracting staff from their core roles.

    We are here to help you find the right balance between utilising existing processes and documentations and creating new ones. Collecting the right information at the right time can deliver a robust and well substantiated claim, with minimal additional impact or compliance. 

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