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New R&D regime to increase spending, but is it enough?

Paul Brislen, Editor. 08 October 2018, 7:45 am

The new research and development tax regime has been announced with a few tweaks following the consultation period.

The threshold of $100,000 spending per annum on R&D has been lowered to $50,000 making it much more accessible to smaller companies, and instead of returning 12.5% of tax paid, the figure will be 15%.

The higher rebate rate and lower point of entry means the scheme will cost more and $1 billion has been set aside for it in the first year.

Research, Science and Innovation Minister Megan Woods says the changes are the result of extensive consultation with industry.

"We pride ourselves on being an innovative country, but our spending on R&D lags behind many of our international competitors, and this government is not content to languish at the bottom of the table," she said in a written statement.

While this new tax credit regime marks a significant change for New Zealand's approach to R&D, it barely gets us on the table alongside heavy investors such as Canada (which offers 35% was refund), the Netherlands (32%), France (30%) or Ireland (25%).

New Zealand has relied heavily on government grants in the past and as a consequence, private sector investment in R&D has been among the lowest in the OECD. New Zealand typically spend around 1.3% of its GDP on research and development - almost all of that coming from public spending - putting us at the tail end of the developed world. This new regime hopes to boost that spending to 2% by 2028, a figure which is still south of the mid point in OECD rankings.


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Noel Reid 12 October 2018, 5:37 pm

To the 2x Pauls

The new definition of R&D still doesn't sit all that well with SW Dev.

It's a major concern that you're expected to spend your money on R&D, and then find out "after the event" whether your expenditure qualifies...

Pre-approval from IRD is coming, but apparently a couple of years away...

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