New tax credit for R&D companies

The New Zealand Government has introduced a new Research and Development (R&D) Loss Tax Credit to help give innovative companies access to some of their tax losses sooner.

This new credit enables eligible companies to ‘cash out’ (claim and be refunded) up to 28% of R&D-related tax losses, so they’ll have money to grow their businesses when they need it most.

Short-term, this change will help improve the cash flow of companies involved in R&D. In the past, these companies would have carried their tax losses forward and deducted them from their income once their company began to make a profit.

Long-term, this change will help encourage innovation. Finding innovative solutions to everyday problems is a cornerstone of our culture. While we might not ‘fix it with no.8 fencing wire’ any more, our can-do approach and self-reliant attitude are still hallmarks of the Kiwi way of life. New knowledge gained by companies involved in R&D can result in improved materials, products or devices – all of which could help give our country a competitive edge and benefit the economy.

Blood, research, sweat, development, tears...

R&D makes unique demands of a company – and the individuals who take it on. Often people involved in R&D are driven by passion – there’s a problem to be solved or a useful invention that has to see the light of day. The work can easily become all-consuming. The long hours and late nights can take a toll.

However, the largest challenge Kiwi innovators usually face is finding the funding to keep going. The process of taking a product from imagination to market is not always linear or predictable – which makes it hard to budget for. At the same time conducting research and developing a great idea generally requires a significant financial investment.

Cash to keep creating

The new Research and Development Loss Tax Credit aims to help ease this financial challenge for innovative companies.

Eligible companies could get up to 28% of their tax losses from R&D returned to them. This could be a lifeline for businesses; making it that little bit easier to take their idea from their back shed to a shop in your neighbourhood.

Check if you’re eligible and apply online

If your company meets eligibility criteria, you can start claiming back tax losses from the 2015/16 tax year. Find out if your company is eligible and apply at www.ird.govt.nz/rd-credit.

To receive this credit, you must submit your application to Inland Revenue before your income tax filing due date for the 2015/16 financial year, so if you think your company might be eligible, don’t delay.