Are you an Australian business with operations in New Zealand? You may be eligible for the NZ R&D Tax Incentive
Australian businesses operating in New Zealand may be eligible for significant tax benefits under New Zealand’s Research and Development Tax Incentive (RDTI). This incentive is designed to support innovation and could offer generous tax relief to your organisation. This article discusses eligibility criteria to consider whether your business might qualify.
What is the R&D Tax Incentive?
The RDTI is the New Zealand Government’s flagship innovation funding mechanism. It provides a 15 per cent tax credit on eligible expenditure, which will be applied against any income tax liability and can be refundable in some circumstances. A credit is available for expenditure between $50,000 and $120 million per year.
Who can qualify?
To be eligible, an entity must:
- Run a business through a fixed establishment in New Zealand
- Own the results of its R&D activities, or be able to use the results of its R&D activities at no extra cost
- If the R&D entity does not own the results but another member of its corporate group does, it is still eligible provided that the entity owning the results is based in New Zealand, or a country with which New Zealand has a double tax agreement (D), including Australia
- Perform a core activity in New Zealand.
What activities and expenditure qualify?
Activities
Core activities are activities that:
- Are conducted using a systematic approach
- Have a material purpose of creating new knowledge, or new or improved goods, services or processes
- Have the intent to resolve scientific or technical uncertainty.
Other activities that have the sole or main purpose of being required for and integral to conducting a core activity, can be eligible as supporting activities.
Expenditure
Eligible expenditure includes:
- Employee costs for employees conducting R&D
- Expenditure or loss on acquiring goods and services used in performing R&D
- Depreciation loss for items used in performing R&D.
If an entity’s R&D is conducted in a commercial production environment, the expenditure is limited to employee costs and expenditure that is additional to what the entity would otherwise have spent.
Expenditure on R&D conducted overseas is generally ineligible, however if the overseas activity is a supporting activity, up to 10 per cent of your total eligible expenditure can be foreign expenditure. This includes expenditure for services performed in New Zealand by people who are not tax residents.
How to claim
- Businesses must first enrol with Inland Revenue, submitting some high-level company information. They only need to enrol once.
- Apply for General Approval by the last day of the third month after your financial year-end (once approved, General Approval can be valid for up to three years) or submit a Criteria and Methodologies Application as a significant performer at least six months prior to your financial year-end.
- Once approved, submit a Supplementary Return with Inland Revenue within 30 days of the income tax return due date.
Recent developments:
The Investment Boost is a new tax incentive measure introduced in the 2025 Budget. This new measure allows businesses to access an upfront deduction equal to 20 per cent of the cost of eligible assets purchased on or after 22 May 2025, in addition to standard depreciation deductions. Notably, the Investment Boost is eligible expenditure for the purposes of the RDTI, thereby allowing R&D entities to access a further 15 per cent tax credit in conjunction with this generous measure. Learn more about the Investment Boost.
How BDO can help
BDO is strongly positioned with experts in R&D and government incentives across both New Zealand and Australia jurisdictions. Our team combines advanced qualifications in STEM-related fields with extensive experience in accounting, tax and law. For tailored assistance, please contact the R&D and government incentives team.
