Receiving your RDTI tax credit
The RDTI tax credit is designed to help reduce the total amount of income tax that you pay.
For most businesses, the RDTI tax credit claimed for a particular income year will be used to reduce the income tax payable for that year.
You can do this by using your anticipated credit to offset provisional tax payments, or using the received credit to offset any tax due following the completion of your income tax return.
In some situations, e.g. if you are in a tax loss position or your tax credit exceeds your income tax to pay, either some or all of your RDTI tax credit could be refunded in cash, and/or carried forward to a future income year. Find out more about this below.
From early 2023, you can also take advantage of RDTI in-year payments - an interest-free loan that gives you cash near the time you incur R&D costs.
General ordering rules for applying tax credits
Tax credits against your income tax liability are applied in the following order, with R&D tax credits from the current tax year coming 5th in this order:
- non-refundable tax credits (which are extinguished if you do not use them in the income year they arise)
- tax credits for supplementary dividends
- imputation credits
- R&D tax credits from a previous tax year
- non-refundable R&D tax credits from the current tax year
- refundable R&D tax credits.
When could I get a cash refund?
If you have any ‘left over’ R&D tax credit, i.e. the credit ends up being greater than your income tax to pay, you may be eligible to receive it as a cash refund.
A cap applies to the amount of refund you can receive. Different rules also apply to any refundable and non-refundable component of your R&D tax credit. Here’s how it all works:
- any ‘left over’ R&D tax credit can be refunded in cash, up to a cap based on labour-related taxes paid by your business
- labour related taxes include PAYE (including withholding tax on schedular payments); FBT (fringe benefit tax); and employee superannuation contribution taxes (ESCT)
- if you are a controller or group company, the refundability cap can also include labour-related taxes paid by other companies that you control or that sit within the same wholly-owned group
- any refundable tax credit payable will first be applied to any liabilities you have from other tax years that are not under an instalment arrangement
- any non-refundable portion of an R&D tax credit that’s not used to offset tax liabilities in the current year will be carried forward to a future income year
- if you are a company, you can only carry your R&D tax credits forward if you meet the shareholder continuity requirements (if continuity of ownership is only met for part of a year, you may only be able to carry forward a portion of your tax credits).
Including RDTI tax credits in provisional tax calculations
If you wish, instead of waiting to receive your RDTI tax credit and using it to offset any tax owed following the completion of your income tax return, you can choose to factor your anticipated RDTI tax credit into your provisional tax calculations for the corresponding income year.
You can do this by:
- using the “estimate provisional tax” service in myIR, or
- sending Inland Revenue a message in myIR, or
- calling or writing to Inland Revenue.
Please note that:
- you can estimate your residual income tax as many times as you like up until your final instalment due date
- if you do re-estimate, you’ll need to adjust later instalments to take into account any earlier underpayments or overpayments
- you may have to pay a penalty if you underestimate your provisional tax.
If I’m eligible for a refund, how and when will I receive it?
Any refundable tax credit will be paid into the bank account held by Inland Revenue for your income tax account.
The payment will be made after:
- you have filed your income tax return, and
- Inland Revenue has reviewed and approved your RDTI Supplementary Return for the relevant income year.
Companies and Māori authorities
If you are a company or Māori authority, you will receive imputation credits or Māori authority credits equal to your R&D tax credits.
You will need to include the imputation credits you expect to receive as a result of your R&D tax credit claim in your imputation return.
Publication of claim recipients
Inland Revenue will publish the following details 2 years after the end of each tax year:
- the name of businesses that have received R&D tax credits that year, and
- the amount of tax credit received, in dollar bands.
This is intended to provide transparency of the RDTI scheme.