What Is the R&D Tax Incentive (RDTI)?
A comprehensive guide to New Zealand's R&D Tax Incentive scheme, including eligibility criteria, how the 15% tax credit works, and how to apply.
New Zealand's Research and Development Tax Incentive (RDTI) is the government's primary mechanism for encouraging businesses to invest in innovation. Administered by Inland Revenue (IR) with support from Callaghan Innovation, the RDTI provides a 15% tax credit on eligible R&D expenditure.
How the RDTI Works
The RDTI is a broad-based tax credit available to businesses of all sizes. If your company spends money on qualifying R&D activities, you can claim back 15 cents for every dollar spent. The credit is applied against your income tax liability, and in many cases, if the credit exceeds your tax bill, you can receive the difference as a cash refund.
For example, if your eligible R&D expenditure for the year is $500,000, you would receive a tax credit of $75,000 (15% of $500,000).
Eligibility Criteria
To qualify for the RDTI, your business must meet several key requirements:
Minimum spend threshold: Your eligible R&D expenditure must be at least $50,000 per year. This ensures the scheme targets businesses with meaningful R&D programmes rather than incidental activities.
R&D must be conducted in New Zealand: At least 90% of your R&D activity must take place within New Zealand. There is a limited provision for overseas R&D, but only where it cannot practically be performed in NZ.
Systematic investigation or experimentation: Your R&D must involve a systematic approach to resolving scientific or technological uncertainty. This means there must be a genuine question about whether something can be achieved, or how it can be achieved, that cannot be resolved by a competent professional working in the field simply by applying existing knowledge.
Core vs support activities: The RDTI distinguishes between core R&D activities (the actual investigation or experimentation) and support activities (things like data collection, testing, and quality control that directly support the core work). Both can be eligible, but support activities must be closely linked to an eligible core activity.
What Expenditure Qualifies?
Eligible expenditure typically includes:
Staff costs are usually the largest component. This covers salaries and wages for employees directly engaged in R&D, including employer contributions to KiwiSaver, ACC levies, and other employment costs. Only the portion of time spent on eligible R&D activities can be claimed.
Contractor payments to third parties performing R&D on your behalf can also qualify, provided the work meets the eligibility criteria and is performed in New Zealand.
Consumables and materials used up or transformed during R&D activities are eligible. This includes raw materials for prototypes, chemicals for experiments, and similar items.
Depreciation on assets used for R&D, such as specialised equipment or software, can be claimed in proportion to their R&D use.
Overheads directly attributable to R&D, such as rent for lab space, utilities, and software licences used exclusively for R&D, may also qualify.
How to Apply
The RDTI application process involves two main steps:
General Approval: Before you can claim the credit, you need to obtain General Approval from Callaghan Innovation. This involves describing your R&D activities and demonstrating they meet the eligibility criteria. General Approval covers a specific period (usually one to three years) and can be applied for at any time.
Supplementary Return: At the end of each tax year, you file a Supplementary Return with Inland Revenue, detailing your actual R&D expenditure for the year. This is where you calculate and claim your tax credit.
It's worth noting that you can apply for General Approval retrospectively — you don't need to have approval before you start your R&D. However, applying early gives you certainty about your eligibility.
Key Dates and Deadlines
The RDTI follows the standard New Zealand tax year. For most businesses, this runs from 1 April to 31 March. Your Supplementary Return is due when you file your income tax return.
General Approval applications can be submitted at any time, and Callaghan Innovation aims to process them within 8 to 12 weeks.
Why the RDTI Matters for NZ Businesses
The RDTI represents a significant opportunity for New Zealand businesses investing in innovation. Whether you're a tech startup building new software, a manufacturer developing new processes, or an agricultural company experimenting with new techniques, the 15% credit can meaningfully reduce your effective R&D costs and improve your cash position.
At Get Tax Credits, we use AI-powered tools to help businesses identify eligible activities, calculate their potential credit, and generate the technical documentation required for a successful application.