RDTI vs RDLTC: Which R&D Scheme Is Right for Your Business?
Comparing New Zealand's two R&D incentive schemes — the R&D Tax Incentive and the R&D Loss Tax Credit — to help you decide which one to claim.
New Zealand offers two distinct R&D incentive schemes, and many businesses don't realise they may be eligible for both. Understanding the difference between the R&D Tax Incentive (RDTI) and the R&D Loss Tax Credit (RDLTC) is crucial for maximising your returns.
Quick Comparison
The RDTI provides a 15% tax credit on eligible R&D expenditure. It's available to profitable and loss-making businesses alike and is the broader of the two schemes.
The RDLTC converts a portion of your tax losses attributable to R&D into a cash payment. It's specifically designed for businesses that are not yet profitable — typically startups and high-growth companies that are investing heavily in R&D but haven't reached profitability.
The R&D Tax Incentive (RDTI)
Best for: Businesses of any size with at least $50,000 in annual R&D spend.
The RDTI is straightforward: spend money on qualifying R&D, get 15% back as a tax credit. If the credit exceeds your tax liability, you receive a cash refund.
Key features:
- 15% credit on eligible R&D expenditure
- Minimum $50,000 spend threshold
- Available to both profitable and loss-making companies
- Requires General Approval from Callaghan Innovation
- Credit applied against income tax, excess refunded
The R&D Loss Tax Credit (RDLTC)
Best for: Pre-revenue and loss-making companies with significant R&D expenditure.
The RDLTC works differently. Instead of a credit on expenditure, it allows you to cash out a portion of your tax losses that are attributable to R&D. The cash-out rate is the company tax rate — currently 28%.
Key features:
- Converts R&D-related tax losses into cash at 28%
- No minimum spend threshold (but must have eligible R&D)
- Only available to companies in a tax loss position
- Capped at the lesser of your R&D expenditure or tax loss
- Maximum claim linked to total R&D spend
- Must file with your income tax return
Can You Claim Both?
Yes, but there are important rules to prevent double-dipping. The same expenditure cannot be counted under both schemes. However, if you have R&D expenditure that exceeds the amount used for your RDLTC claim, you can potentially claim the RDTI on the remainder.
In practice, many early-stage companies find the RDLTC more valuable because the 28% cash-out rate is almost double the RDTI's 15% credit rate. If you're in a tax loss position and your R&D spend is significant, the RDLTC typically delivers a larger cash benefit.
Decision Framework
Claim the RDLTC if:
- Your company is in a tax loss position
- You have significant R&D expenditure
- You want to maximise the cash-out percentage (28% vs 15%)
- You're a startup or high-growth company not yet profitable
Claim the RDTI if:
- Your company is profitable (or has minimal tax losses)
- Your R&D spend is at least $50,000
- You want a straightforward credit against your tax bill
- You have R&D expenditure beyond what the RDLTC covers
Consider claiming both if:
- You have R&D expenditure exceeding your tax losses
- You want to maximise your total benefit across both schemes
A Practical Example
Consider a software company with:
- $400,000 in R&D expenditure
- A tax loss of $300,000
RDLTC claim: The company can cash out $300,000 (the lesser of R&D spend and tax loss) at 28%, receiving $84,000 in cash.
RDTI claim on remainder: The remaining $100,000 of R&D expenditure ($400,000 minus $300,000 used for RDLTC) could qualify for the RDTI at 15%, giving an additional $15,000 credit.
Total benefit: $99,000 — significantly more than claiming either scheme alone.
Getting Started
The application processes for both schemes involve documenting your R&D activities, demonstrating eligibility, and filing the appropriate returns. At Get Tax Credits, our platform helps you through both processes, using AI to identify eligible activities and generate the required technical documentation.
Whether you're a startup exploring the RDLTC for the first time or an established business looking to optimise your RDTI claim, understanding which scheme — or combination of schemes — works best for your situation is the first step to securing your credits.