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Growth Grant transition support – Preparing to apply

RDTI transition support for former Growth Grant recipients

Update: August 2021
4

How is the transition support payment calculated?

You can use the following information to obtain an indication of the maximum transition support payment your business may be entitled to receive. However, your actual payment amount will be calculated by the Callaghan Innovation team once you have applied for the transition support payment and provided all of the necessary information, including Inland Revenue’s ‘R&D Tax Incentive: Transition Support Payment’ letter.

The transition support payment amount is determined using formulas that require calculation of your business’s expenditure on eligible R&D, under both the Growth Grant and RDTI schemes.

There are two transition support payment calculation formulas, one to determine a full-year payment, and the other to calculate a part-year payment. These formulas are explained below.

1. Calculation for a Full-Year transition support payment

Callaghan Innovation will assess applications and calculate full-year transition support payments using three definitions of eligible R&D expenditure:

  • Growth Grant Eligible R&D Expenditure 3-year average;
  • Growth Grant Eligible R&D Expenditure; and
  • RDTI Eligible R&D Expenditure.

Key definitions are explained in the table below:

R&D Expenditure definition
Growth Grant Eligible R&D Expenditure 3-year average
RDTI Eligible R&D Expenditure
Growth Grant Eligible R&D Expenditure
How it will be calculated
For any year a business applies for the transition support payment the average of the business’s Growth Grant Eligible R&D Expenditure in the 3 years immediately preceding that year will be calculated.
RDTI Eligible R&D Expenditure is the amount of R&D expenditure confirmed by Inland Revenue as eligible for the RDTI in that year.
For any year a business applies for the transition support payment it will need to provide Callaghan Innovation with its Growth Grant Eligible R&D Expenditure for that year (capped at $25m in line with the Growth Grant scheme).
Explanation
Callaghan Innovation will calculate this figure after careful review of Growth Grant payments made to each business, aligned to the business's income year (i.e. not aligned to the Growth Grant contract year, nor to the financial year end reporting timeframe – if that differs from the business’s income year.)
A business must provide Callaghan Innovation with Inland Revenue's ‘R&D Tax Incentive: Transition Support Payment’ letter, which details the final decisions for the RDTI application(s).
A business must accurately self-assess this figure and provide it to Callaghan Innovation with a directors' attestation.

Here is the full-year formula Callaghan Innovation will use to determine the total amount of each business's transition support payment in any of the relevant years:

Formula
The amount that a business is entitled to receive in the relevant year is equal to 20 percent of the business’s 'Transition Support Payment Eligible R&D Expenditure', where its 'Transition Support Payment Eligible R&D Expenditure' is its 'Maximum Transition Support Payment Eligible R&D Expenditure' under this scheme, less its 'RDTI Eligible R&D Expenditure' in the relevant year.

The full-year calculation formula can be expressed as:

Maximum TSP Eligible R&D Expenditure
=
Growth Grant Eligible R&D Expenditure 3 year average
or
Growth Grant Eligible R&D Expenditure for relevant year
(whichever is the lower amount)
Transition Support Payment
=
(Maximum TSP Eligible ExpeditureRDTI Eligible R&D Expenditure for relevant year) x 20%

Below is a working example that illustrates how the full-year calculation will be applied.

In this example, the business had a Growth Grant contract which ended on the last day of its 2020/2021 year. The business participated in the RDTI in the 2021/2022 year and did not receive a Project Grant.

2021/2022 full-year transition support payment calculation example

Hover your cursor over sections of this table for further information.
A
Growth Grant Eligible R&D Expenditure 3-year average
$964,776.00
Based on past Growth Grant payments and calculated by Callaghan Innovation.
B
Growth Grant Eligible R&D Expenditure for relevant income year
$1,500,000.00
Self-assessed by the business.
C
RDTI Eligible R&D Expenditure
$800,000.00
From Inland Revenue's ‘R&D Tax Incentive: Transition Support Payment’ letter.
D
Maximum TSP Eligible R&D Expenditure
$964,776.00
The lower of: $964,776.00 (A) and $1,500,000.00 (B)
E
TSP Eligible R&D Expenditure
$164,776.00
$964,776.00 (D) – $800,000 (C)
F
Transition Support Payment due to business
$32,955.20
$164,776.00 (E) x 20%

The business’s transition support payment for the 2021/2022 year is $32,955.20.

What if my business has no eligible R&D under the RDTI?

After going through the RDTI application and assessment process, it is possible your R&D might not fit the current RDTI R&D eligibility criteria. In this case, your RDTI Eligible R&D Expenditure figure will equal zero.

2. Calculation for a Part-Year transition support payment

It is important to note that the calculation formula differs from the above if you are claiming the transition support payment for a part-year rather than a full-year.

For the 2020/2021 income year only, customers who had balance dates (i.e. financial year end dates) between 1 April 2021 and 30 September 2021 were able to participate in both the Growth Grant and the RDTI. This is a special exception for this group of customers only.

These customers were able to receive Growth Grant payments until 31 March 2021 (the end of the Growth Grant scheme), and to apply for the RDTI for the remainder of their 2020/2021 income year. As these businesses submitted part-year RDTI applications, they are also able to submit part-year 2020/2021 transition support payment applications.

Callaghan Innovation will assess applications and calculate part-year transition support payments using four definitions of eligible R&D expenditure:

  • Growth Grant Eligible R&D Expenditure 3-year average;
  • Part-Year Growth Grant Eligible R&D Expenditure (based on Growth Grant payments);
  • Growth Grant Eligible R&D Expenditure (period participated in RDTI); and
  • RDTI Eligible R&D Expenditure.

Here is the part-year formula Callaghan Innovation will use to determine the total amount of an eligible business's transition support payment in the 2020/2021 income year:

Formula
If a business both received a Growth Grant payment and participated in the RDTI in the 2020/2021 year:
  • For the purpose of calculating its ‘Maximum Transition Support Payment (TSP) Eligible R&D Expenditure’, its ‘Growth Grant Eligible R&D Expenditure’ for the 2020/2021 year should be calculated as if the business had remained in the Growth Grant scheme for the whole year.
  • For the purpose of calculating its ‘TSP Eligible R&D Expenditure’ for the 2020/2021 year, its ‘Growth Grant Eligible R&D Expenditure’ for the period in which it received a Growth Grant payment should be offset against its ‘Maximum TSP Eligible R&D Expenditure’ (i.e. its ‘TSP Eligible R&D Expenditure’ is its ‘Maximum TSP Eligible R&D Expenditure’ under this scheme, less its ‘RDTI Eligible R&D Expenditure’ in the relevant year and its ‘Growth Grant Eligible R&D Expenditure’ for the period for which it received a Growth Grant payment).

Below is a working example which illustrates how the part-year calculation will be applied.

The business has a balance date of 30 June 2021. Its Growth Grant contract ended on 31 March 2021, and it participated in the RDTI from 1 April to 30 June 2021. It has submitted a part-year transition support payment application for the 2020/2021 income year. In its transition support payment application, it has noted the following:

  • Its Growth Grant Eligible R&D Expenditure for the three months (1 April – 30 June 2021) is $150,000, and
  • Its RDTI Eligible R&D Expenditure for the three months (1 April 2021 – 30 June 2021) is $100,000

2020/2021 part-year transition support payment calculation example

Hover your cursor over sections of this table for further information.
A
Growth Grant Eligible R&D Expenditure 3-year average
$1,000,000
Based on past Growth Grant payments and calculated by Callaghan Innovation.
B
Part-Year Growth Grant Eligible R&D Expenditure (based on Growth Grant payments)
  1. $150,000
  2. $150,000 / 20%
    = $750,000
Calculated by Callaghan Innovation. A part-year TSP calculation requires the total Growth Grant Eligible R&D Expenditure that was approved under the Growth Grant scheme in the 2020/2021 income year.
C
Growth Grant Eligible R&D Expenditure (period participated in RDTI)
$150,000
(1 April – 30 June 2021)
In its transition support payment application, the business provides the R&D expenditure for the period that it participated in the RDTI that is eligible under Growth Grant rules (it excludes the part-year R&D expenditure approved under the Growth Grant scheme (B))
D
RDTI Eligible R&D Expenditure
$100,000
(1 April – 30 June 2021)
From Inland Revenue's ‘R&D Tax Incentive: Transition Support Payment’ letter.
E
Maximum TSP Eligible R&D Expenditure
$900,000
The lower of: $1,000,000 (A) and ($750,000 (B)$150,000 (C)) = $900,000 (E)
F
TSP Eligible R&D Expenditure
$50,000
$900,000 (E) – $750,000 (B)$100,000 (D)
G
Transition Support Payment due to business
$10,000
$50,000 (F) x 20%

The business’s transition support payment for the 2020/2021 year is $10,000.

Note
Further examples of how the calculation will work under different scenarios will be published on this website before online 2020/2021 applications for the transition support payment open in late November 2021.
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How do I prepare to apply for the transition support payment?

Before you start your application, it is important that you know about the compliance requirements for the transition support payment. These are:

  • Businesses are required to keep separate records and account for R&D expenditure under the rules of both the Growth Grant and RDTI schemes.
  • Businesses must self-assess their Growth Grant Eligible R&D Expenditure for the income year they are applying for funding, and will need to provide evidence to support this self-assessment in their transition support payment application. View a copy of the Director’s attestation form.

What are the audit requirements for the transition support payment scheme?

Under the Ministerial Direction, Callaghan Innovation must provide an assurance to MBIE that businesses are complying with the requirements of the transition support payment scheme. This means that for each year of the transition support payment scheme, up to a third of transition support payment applications (for each of the three relevant years) will be audited, to ensure the integrity of the scheme.

The audits will verify the directors' attestation that a business has accurately assessed its Growth Grant Eligible R&D Expenditure for the relevant year, and made a good faith attempt to participate in the RDTI. That is, that all eligible R&D expenditure was included in the SR/GA/CAM application(s) for that income year.

Businesses with significant differences between their RDTI R&D expenditure and Growth Grant R&D expenditure should expect to be audited.

Any overpaid transition support payments will need to be repaid to Callaghan Innovation. The business will also be required to pay an additional amount set by Callaghan Innovation. Callaghan Innovation may waive this additional amount if the excess amount the business received was small (compared to its actual Growth Grant Eligible R&D Expenditure) and it determines that the error in its self-assessment was made in good faith, or if other exceptional circumstances apply. In setting the amount, Callaghan Innovation will be guided by the considerations outlined in the Ministerial Direction.

What documentation will I need to keep as evidence to support my application?

For each of the years in which the transition support payment operates (2019/2020, 2020/2021 and 2021/2022), businesses selected for audit will be asked to provide:

  • A listing and explanation of RDTI eligible activities, and
  • A listing of RDTI Eligible R&D Expenditure.

Businesses that are audited must provide evidence of accurate assessment of Growth Grant Eligible R&D Expenditure in the relevant year; and evidence of a good-faith attempt to apply for funding under the RDTI. The burden is on the business to establish that it has complied, rather than on Callaghan Innovation to determine that it has not. Businesses may be asked to provide:

  • A listing and explanation of R&D activities that were not considered eligible under the RDTI but were considered eligible under the Growth Grant
  • A listing of Growth Grant Eligible R&D Expenditure
  • If overheads have been claimed, the calculations and any other supporting information to demonstrate how the calculation has been made and why it is reasonable
  • The RDTI application; and
  • Any other information provided to the RDTI team as necessary to assess the eligibility of the business’s activities under the RDTI.

Businesses may also be asked to provide:

  • Supporting documentation (invoices, receipts etc.) for materials and consumables or capital items purchased
  • Invoices for external labour; and
  • Employee timesheets of salary slips internal labour and evidence to support the allocation of employee time between R&D and non-R&D activities.

If my transition support payment application is selected to be audited, when is this likely to happen?

The following table shows the approximate audit start dates for each of the income years covered by the transition support payment scheme:

Application Income Year
2019/2020
2020/2021
2021/2022
Audits to start from approximately:
June 2022
June 2023
June 2024
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