Businesses have until 31 August to apply for the research and development tax incentive

Research & DevelopmentTax

3 August 2021

Due to COVID-19 and further updated guidance released in March 2021 on the definition of ‘eligible R&D activities’, the deadline for submitting a claim for the research and development (R&D) tax incentive (RDTI) for the 2020 income year has been extended to 31 August 2021.

So, if your business has spent more than $50,000 on R&D expenses during the 2020 income year, you should consider applying for the RDTI, by filing an R&D supplementary return, even if your business’ 2020 tax return has already been filed.

What is the RDTI?

The RDTI offers a 15 percent tax credit on eligible R&D expenditure of up to $120m for eligible businesses. Depending on your business’ performance, the RDTI will either be offset against its income tax liability or may be refundable.

How do I know if my business is eligible for the RDTI?

Your business may be eligible to receive the RDTI if your business conducted R&D activities which satisfy the following requirements during the 2020 income year:

  • Performed in New Zealand;

  • Seeks to resolve ‘scientific or technological uncertainty’ – scientific or technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not publicly available or deducible by a competent professional working in the field;

  • Follows a systematic approach; and

  • Seeks to create new knowledge, or new or improved processes, services or goods.

How do I claim the RDTI?

The process for claiming the RDTI is somewhat different in the 2021 income year.

To apply, you’ll need to submit a general approval application by 31 August 2021. This application is reviewed by Callaghan Innovation (working in collaboration with Inland Revenue) to assess the eligibility of the R&D activities disclosed in the general approval application.

If a general approval application is not filed by 31 August 2021, your business will not be able to claim an RDTI for the 2021 income year. So, with only a month to go until the deadline, speak to your adviser or contact the Findex Tax Advisory team for assistance with your RDTI application.

Author: Katherine Ong

Before she joined Findex in 2018, Katherine worked as a Group Financial Reporting Manager for Frucor Suntory, partnering with the business units in New Zealand and Australia. She was also the liaison (on behalf of the New Zealand and Australian business units) with shareholders on reporting and compliance matters. Katherine first aims to understand her clients’ objectives and partners with them to recommend commercial and pragmatic tax solutions.