HOW DOES THE RDTI WORK?

RDTI in-year payments

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What are RDTI in-year payments?

RDTI in-year payments will offer you the option of an interest-free government loan that can provide regular cash payments towards your R&D costs, starting in the same year as you conduct your R&D.

This will enable you to get support closer to when R&D costs are incurred, rather than waiting for your RDTI tax credit to be issued (which can only happen after you’ve submitted your income tax return, and your RDTI Supplementary Return has been finalised by Inland Revenue).

You will be able to request up to 80% of the value of your expected tax credit for a particular income year.

Generally, the loan won’t need to be repaid until after your RDTI Supplementary Return has been finalised.

Who’s most likely to benefit from RDTI in-year payments?

Any business that has applied for the RDTI will be able to apply for RDTI in-year payments. However, they are mainly designed for businesses that have no - or only partial - access to the other method of ‘in-year’ support offered by the RDTI.

If you’re a profitable business, you already have the option of using up to 100% of your anticipated RDTI tax credit for a given income year, to offset your provisional tax payments for that year.

This option isn’t available, or can’t be fully utilised, by the following businesses, who will benefit the most from RDTI in-year payments:

  • businesses with no provisional tax to pay, such as start-ups and those operating at a loss
  • profitable businesses whose RDTI tax credit exceeds any provisional tax due.

How will RDTI in-year payments work?

RDTI in-year payments will offer you a loan to help support your R&D expenditure for a given income year.

If you have more than one General Approval application, you will be able to include expenditure associated with each application on the same loan.

It will only be necessary to apply for the loan once per income year, but you will be able to request payments at up to 3 regular intervals.

Each payment will be based on actual, eligible R&D expenditure prior to the payment date.

The loan will generally become due for repayment after your RDTI Supplementary Return has been finalised by Inland Revenue, although a different repayment date may apply in some circumstances (see "When will I have to repay my loan?" below for more details).

No interest will be charged on your loan if it’s repaid on time.

  • TMNZ has been engaged to manage and administer RDTI in-year payment loans on behalf of the Government.

    TMNZ are the originators of tax pooling in New Zealand.

  • You will be able to take advantage of RDTI in-year payments if you meet the following criteria:

    • your business is a going concern
    • you are performing R&D activities that have been approved as eligible for the RDTI
    • you pass Anti-Money Laundering (AML) and Due Diligence (DD) checks that will be carried out after you apply for RDTI in-year payments
    • you give your consent for TMNZ to:
      • access specific information in your IR RDTI account that's needed to process your loan application and payments, e.g. R&D activity and expenditure details, and
      • receive notification that your RDTI Supplementary Return has been processed, in order to arrange for the repayment of your loan.

    Please note that:

    • before you can apply for RDTI in-year payments, you must first apply for the RDTI, by submitting either a General Approval application or Criteria and Methodologies application
    • before you can request any payment:
      • you must first apply for RDTI in-year payments and pass the AML checks, and
      • your RDTI application must be approved
    • all loans and payment requests must be approved by MBIE
    • information provided in your loan application and payment requests are subject to audit by MBIE, if required
    • if you have a previous RDTI in-year payments loan that remains unpaid after the due date, you are not eligible to receive another loan.
  • You could potentially have more than one active loan, if you take out a loan for a new income year and you still have a loan from a previous income year that has not yet matured.

How much will I be able I get?

You will be able to get up to 80% of the RDTI tax credit receivable on actual, eligible R&D expenditure per income year, after any amount you wish to offset against provisional tax has first been deducted.

We’ve provided some examples of loan payment calculations below.

  • Example 1:  payment calculation with no provisional tax to offset

    In this example, a business:

    • requests a payment based on prior, eligible expenditure of  $300,000, and
    • advises that it does not intend to offset any amount against provisional tax.

    Actual eligible R&D expenditure: $300,000

    RDTI tax credit @ 15%: $45,000

    Less amount offset against provisional tax: $0

    RDTI tax credit eligible for RDTI in-year payments: $45,000

    Loan payment @ 80%: $36,000

     

    Example 2:  payment calculation with provisional tax to offset

    In this example, a business:

    • requests a payment based on prior, eligible expenditure of  $300,000, and
    • advises that it intends to offset $25,000 of its anticipated RDTI tax credit against provisional tax due during the period covered by the payment.

    Actual eligible R&D expenditure: $300,000

    RDTI tax credit @ 15%: $45,000

    Less amount offset against provisional tax: $25,000

    RDTI tax credit eligible for RDTI in-year payments: $20,000

    Loan payment @ 80%: $16,000

     

    Benefit of using the anticipated RDTI tax credit to offset provisional tax
    Note that in example 2, the total benefit to the business is $41,000 (made up of the provisional tax offset of $25,000, plus the RDTI in-year payment of $16,000).

    This compares to a total benefit to the business of $36,000 in example 1.

    The difference reflects the benefit, if possible, of using the anticipated RDTI tax credit to offset provisional tax, given 100% of the credit can be offset this way, versus accessing 80% of the anticipated credit via RDTI in-year payments alone.

     

What are the payment dates?

You will be able to request up to 3 payments per income year.

The dates on which payments are made will be announced in the future.

  • If you miss a particular payment date/s, you will be able to include expenditure prior to that date in a subsequent payment request for the same income year.

    It will not be possible, however, to carry forward expenditure from a previous income year to a subsequent income year.

     

How will I apply for RDTI in-year payments?

Applications are not yet open - but here’s a preview of the application process:

RDTI in-year payments will be managed and administered by TMNZ.

Once applications are open, you will be able to apply by going to an “RDTI in-year payments” portal on the TMNZ website.

See “What will be involved in applying?” below for an overview of the application process.

  • Applying for RDTI in-year payments will be a two-step process:

    • Register - this will enable you to create an RDTI in-year payments account for your business and advise which users you want to access the account and act on your behalf. Once you’ve set up an account you will be able to apply for RDTI in-year payments.
    • Apply - this step is to:
      • check that you have applied for the RDTI
      • identify your potential loan amount, based on estimated expenditure on your RDTI application
      • identify your NZBN number and other information to enable Anti Money Laundering (AML) and Due Diligence (DD) checks to be carried out
      • obtain your authority for TMNZ to access your IR RDTI account (to check R&D activities and expenditure details) and be notified once your RDTI Supplementary Return has been processed (to activate your loan repayment).

    As soon as you’ve applied for RDTI in-year payments and passed AML checks, you will be able to request a payment.

    Remember:

    • before you can apply for RDTI in-year payments, you will first need to apply for the RDTI, by submitting either a General Approval application or Criteria and Methodologies application
    • if you have a previous RDTI in-year payments loan that remains unpaid after the due date, you will not be eligible to receive another loan.
  • To request a payment on a particular date, you will need to apply for RDTI in-year payments and submit a payment request ahead of that date.

    The dates for all deadlines will be announced in the future.

How will I request a payment?

You can’t currently request a payment as applications are not yet open - but here’s a preview of the payment request process:

To request a payment, you will need to submit a payment request ahead of the actual payment date. 

You will be able to do this via the “RDTI in-year payments” portal on the TMNZ website.

  • When requesting a payment, you will be asked to:

    • record all eligible expenditure you wish to have taken into account
    • advise the amount of any provisional tax you intend to offset 
    • provide a declaration from a signatory of your business (such as a Director or the Chief Financial Officer) to attest that the request is a true and correct record of expenditure and your business remains a going concern.
  • It will be up to you how much of your total eligible expenditure you record on a payment request.

    We appreciate that:

    • many businesses will want to access the maximum loan amount available to them
    • some businesses may wish to keep their loan within a certain limit, to manage their loan exposure and ability to repay the loan
    • some businesses may wish to restrict their loan to easily identifiable costs, such as people costs, and leave allocated costs (such as depreciation on shared assets) solely for their RDTI Supplementary Return.
  • If there’s a significant difference between the estimated expenditure on your RDTI application and the actual expenditure you enter when requesting a loan payment, you may be asked to:

    • provide evidence that supports the increased spending, and
    • seek an alteration to your RDTI application.

When will I have to repay my loan?

Your RDTI in-year payments loan will be due for repayment on whichever date below applies to you:

If you have filed your RDTI Supplementary Return by the due date
Your loan will be due on the earliest of the following dates:

  • one month after Inland Revenue has approved or declined your RDTI Supplementary Return, or
  • six months after the due date of your RDTI Supplementary Return.

If you have not filed your RDTI Supplementary Return by the due date
Your loan will be due one month after the due date of your RDTI Supplementary Return.

  • If your loan isn’t repaid by the due date:

    • interest will be charged on the loan from one month after the due date - this will reflect Inland Revenue’s “Use of Money” interest rate applicable at the time
    • a standardised, short-term repayment plan will be arranged.

     

Working out what you can afford to repay

If you intend to apply for RDTI in-year payments, we recommend that you carefully consider:

  • how you might receive your RDTI tax credit, i.e. as a cash refund and/or a tax credit, and
  • how this could affect your ability to repay your loan.

This is because regardless of how you receive your RDTI tax credit, your RDTI in-year payments loan will become due for repayment on the applicable due date.

  • Any RDTI tax credit that can’t be offset by tax due can be refunded in cash, up to a cap equal to the amount of labour-related taxes you pay, including:

    • PAYE
    • fringe benefit tax (FBT)
    • employee superannuation contribution taxes (ESCT).

    Any remaining tax credit will be carried forward to a future income year.

    If you are relying on a cash refund to repay an RDTI in-year payments loan, we suggest you calculate what your anticipated refund might be in advance. This may help you determine what is an affordable amount for you to borrow.

    Remember, it will be your responsibility to ensure you are in a position to repay the loan.

The sooner you apply for the RDTI, the sooner you can access RDTI in-year payments

If you want to access RDTI in-year payments, we recommend you submit your RDTI application as soon as possible after the start of your income year.

This is because:

  • you must have submitted an RDTI application before you can apply for RDTI in-year payments
  • you can't receive a payment until your RDTI application has been approved.

It will be important to file your RDTI Supplementary Return on time

If you take out an RDTI in-year payments loan, it will be important to file your RDTI Supplementary Return on time.

This is because no RDTI tax credit can be issued if you miss the RDTI Supplementary Return deadline.

RDTI Supplementary Returns are due within 30 days after the due date of your income tax return.

Filing your RDTI Supplementary Return on time will help avoid you being in a position where you have an RDTI in-year payments loan, but potentially no RDTI tax credit to offset the loan.