Top 10 R&D Tax Credit Questions We Get Asked in New Zealand

We work with dozens of New Zealand businesses on their R&D tax credit claims every year, and certain questions come up again and again. Here are the top 10 questions we actually get asked — and the straight answers.

1. Can two commonly-owned companies both apply for RDTI/RDLTC separately?

Yes, provided each company has separate and distinct R&D activities and each owns its own intellectual property. You can't split one R&D programme across two entities just to double-dip on credits. IRD will examine this during their review, so it's important that each company can independently demonstrate its own R&D activities, uncertainties, and outcomes.

If both companies genuinely perform different R&D — for example, one develops hardware and the other develops software — they can each file their own claim.

2. What's the difference between RDLTC and RDTI?

These are two separate schemes with different mechanics:

RDLTC (R&D Loss Tax Credit): Provides a 28% cash refund on your tax losses, subject to limitations based on your R&D spend, wage intensity, or total losses. Designed for pre-profit companies — you need to be in a tax loss position to use it.

RDTI (R&D Tax Incentive): Provides a 15% tax credit on your eligible R&D expenditure, subject to limitations based on PAYE paid. Available to both profitable and loss-making businesses.

The key difference: RDLTC pays a higher rate (28% vs 15%) but only works if you have tax losses. Many early-stage companies find the RDLTC more valuable. You can claim both in the same year on different portions of your R&D spend — see our RDTI vs RDLTC comparison guide for a worked example.

3. How is the RDTI refundability cap calculated?

The RDTI credit you earn (15% of eligible R&D spend) can be used to reduce your tax bill to zero. But the amount that can be refunded in cash — i.e. paid out beyond zeroing your tax — is capped at the total PAYE you paid for the year.

If your R&D credit exceeds both your tax liability and the PAYE cap, the excess isn't lost. It carries forward to offset future income tax payments in subsequent years.

Example: Your RDTI credit is $120,000. Your income tax is $50,000. Your PAYE for the year is $200,000. The credit first wipes out your $50,000 tax bill. The remaining $70,000 is refundable because it's under the $200,000 PAYE cap. You receive $120,000 total ($50,000 tax reduction + $70,000 cash refund).

4. Why do salary and wage figures differ between the application and IRD records?

This is one of the most common queries IRD raises during a review, and it almost always comes down to timing differences.

The main causes:

March salaries paid in April: Payday filing is based on the date wages are actually paid, not when the work was performed. So a March pay run processed on 1 April shows up in the next tax year's IRD records, even though it's a cost in the current financial year.
Year-end annual leave accruals: Your financial statements may include accrued leave balances that haven't been paid yet, creating a difference from IRD's payment-based records.
Timing of KiwiSaver and ACC payments: These employer contributions may be accrued in one period and paid in another.

We reconcile these with a clear breakdown showing what ties directly to IRD records versus what relates to accruals and timing differences. Having this reconciliation ready before IRD asks for it significantly speeds up the review process.

5. What contractor information does IRD need?

If you're claiming contractor costs in your R&D application, IRD will ask for detailed information about each contractor. Be prepared to provide:

Names and IRD/GST numbers of each contractor
Nature of services provided — what R&D work they actually performed
Apportionment between R&D and non-R&D activities — if a contractor does both, what percentage relates to eligible R&D?
Confirmation all work was performed in New Zealand — the 90% in-NZ rule applies to contractors too
Confirmation contractors were engaged at arm's length — especially important if the contractor is a related party or shareholder

Keep contracts, invoices, and a summary of each contractor's R&D involvement on file. IRD may request this documentation years after the claim is filed.

6. How do you apportion contractor costs between R&D and non-R&D?

Apportionment is based on the nature of the work performed, not a blanket percentage across all contractors.

Some contractors are straightforward — a specialist developer hired solely to build an experimental prototype is 100% R&D. Others require more nuance — a design contractor who spends half their time on R&D user interface experiments and half on production design work might be apportioned at 50%.

The key is having a reasonable and documented basis for each contractor's R&D percentage. This could be:

Task-level breakdowns from project management tools
Separate invoices or line items for R&D vs non-R&D work
A written description of the contractor's role in the R&D programme
Time records provided by the contractor

Avoid applying a single blanket percentage to all contractors — IRD expects each apportionment to reflect the actual work performed.

7. Does enhancement of existing software count as R&D?

It can, but only if it constitutes a "significant redevelopment" rather than normal ongoing development or business-as-usual (BAU) improvement.

The distinction IRD draws:

Eligible: Rebuilding a core system component to achieve capabilities that involve genuine technical uncertainty — for example, re-architecting a monolithic application into a distributed system where it's unclear whether the new architecture can meet latency and consistency requirements.
Not eligible: Adding new features to existing software using established patterns, fixing bugs, improving performance through known optimisation techniques, or updating a UI.

If you're claiming enhancement work, be prepared to explain why the work should be considered R&D rather than standard maintenance or improvement. The presence of technological uncertainty is what separates the two — if a competent professional could have predicted the outcome, it's probably not R&D.

8. How do I register for RDLTC in myIR?

The process involves a few steps:

Your company needs to be registered for the R&D Loss Tax Credit in myIR first. This is a one-time activation.
Once activated, navigate to Income Tax > More > Apply for an R&D loss tax credit.
Follow the application prompts, which will ask for details about your R&D activities and expenditure.

Your tax agent can also access this on your behalf if they are linked to your company's myIR account. If you're working with an accountant, they can handle the filing directly.

Note: The RDLTC application is separate from the RDTI General Approval process. They are filed through different channels — RDLTC through myIR, RDTI General Approval through Callaghan Innovation.

9. When can we file R&D claims after year-end?

You cannot file the RDLTC or RDTI until your income tax return (IR4) is filed for the relevant year. The R&D claims are supplementary to the tax return, not standalone filings.

Critical deadline for RDLTC: The RDLTC application must be filed within 30 days after the IR4 due date. Late applications cannot be considered — there is no discretion for IRD to accept late RDLTC filings, so this deadline is firm.

RDTI timing: The RDTI Supplementary Return is filed alongside or after the income tax return. General Approval from Callaghan Innovation should ideally be obtained before filing, though retrospective applications are permitted.

Practical tip: Don't leave your R&D documentation to the last minute. Prepare your technical narratives and expenditure calculations well before the IR4 filing date so the R&D claim can be submitted promptly.

10. How long do R&D applications take to process?

IRD advises processing times of up to 10 weeks for both RDLTC and RDTI claims. In practice, straightforward claims with good documentation are often processed faster, while complex or incomplete claims may take longer.

Important: Claims may be audited for up to four years after submission. This means you should keep all supporting documentation — technical narratives, time records, contractor details, financial reconciliations — on file for at least four years after the claim is processed.

If IRD raises questions during processing, responding quickly and completely is the best way to avoid delays. Having a well-organised claim file with pre-prepared reconciliations and contractor summaries makes a significant difference.

The Bottom Line

R&D tax credits are a genuine and valuable incentive for New Zealand businesses investing in innovation. The rules aren't overly complicated, but the details matter — particularly around apportionment, documentation, and timing.

If any of these questions resonated with your situation, our team at Get Tax Credits can help you navigate the process. Our AI-powered platform handles the financial analysis and documentation, while our team provides the expertise to ensure your claim is robust and compliant.