What R&D spend applies to the RDTI?
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Eligible expenditure
To claim the RDTI you must be able to identify which expenditure is directly connected to R&D activities and meets the eligibility criteria. It must be greater than $50,000 in the year, unless it is for a contract with an approved research provider (ARP). The maximum eligible expenditure in any year is $120m unless you receive approval for a higher limit.
Amounts you spend can generally only be claimed to the extent they relate to R&D. A special rule applies for R&D done in a commercial production environment, such as a manufacturing line. For more information on the commercial production rule, refer to page 66 of Inland Revenue's detailed RDTI guide.
Types of eligible expenditure
Depreciation
You can’t claim the RDTI on assets you acquire and use in your R&D activity, but you can claim depreciation on them. Depreciation is calculated using the same rates and methods you use to calculate your income tax deductions.
Where assets are used for eligible activities and other purposes, the depreciation must be reasonably apportioned between them. This would normally be based on the time used for each, ignoring any downtime.
Special rules apply for amounts you spend creating new assets. For more information on these rules, please refer to page 76 of the detailed RDTI guide.
Employee costs
You can claim your costs for employees involved in eligible activities, including:
• Salaries, wages, overtime, bonuses, sick, annual and long service leave
• The cost of shares issued to employees.
If employees are performing other duties, their costs must be reasonably apportioned and documented with time sheets, project plans, or other documents giving a clear breakdown.
Goods and services
You can claim the RDTI on the cost of acquiring goods and services (other than assets) you use in your R&D. This includes overheads, materials used, and paying contractors performing R&D for you.
Special cases
Associated persons
If you acquire goods, services, property, or a right to use property from an associate, you can only claim the cost they incurred to acquire the property or service, or the market value of your right to use it.
Contracted expenditure
If you contract out your R&D, you must deduct any ineligible expenditure incurred by the contractor from the expenditure you claim. For example, if your payment to the contractor includes an amount for them to purchase specialised equipment (depreciable property for the contractor), you can’t include the cost of that equipment (but you might include an amount for depreciation loss on the item while it was being used in your R&D).
For further detailed information, download our How-To Guide: Claiming R&D performed by a contractor.
Production expenditure
If you perform your R&D in the course of normal commercial production, you can only claim the employee and additional costs related to the actual R&D. This means that costs like rent, rates, insurance and maintenance won’t qualify.
Foreign expenditure
If you carry out R&D activities outside New Zealand which are not integral to a core R&D activity you conduct in New Zealand, the expenditure on those activities is ineligible.
Expenditure on supporting R&D activities conducted outside New Zealand might be eligible for the RDTI, but can’t exceed 10% of your total eligible expenditure.
Special rules mean that amounts you pay non-resident contractors and employees to do R&D in New Zealand are considered foreign expenditure, and come within the 10% cap. For more information on this, refer to page 70 of the detailed RDTI guide.
Ineligible expenditure
You can’t claim the RDTI on the following:
- The GST input portion of expenditure
- Someone else’s eligible expenditure
- Amounts in excess of $120m unless you have approval for a higher amount (this includes any amounts spent by your associates on R&D)
- Expenditure incurred in acquiring depreciable property
- Expenditure that contributes to the cost of depreciable tangible property (other than prototypes)
- Depreciation on property to the extent the cost of the property is eligible expenditure
- Depreciation on pooled property where an item in the pool is not used solely in performing R&D
- Depreciation when as asset is written off or sold below its adjusted tax value
- Certain amounts of depreciation when property is acquired from an associate
- Profits on R&D services and property provided by associates
- Amounts in excess of market value for leasing assets from associates
- Expenditure to purchase land
- Interest and other financing costs
- Professional fees for determining your entitlement to the RDTI
- Expenditure to acquire an interest in intangible property other than software
- Expenditure on bespoke software
- Internal software development expenditure in excess of $25m (this includes any amounts spent by your associates on R&D)
- Expenditure on goods or services in excess of market value
- Gifts
- The cost of acquiring technology that is used as a basis for further R&D activities
- Expenditure to commercialise the results of R&D activity
- Expenditure that relates to a government or local authority grant
- Expenditure on inputs used, or subject to a process or transformation, to the extent the expenditure does not exceed the value of the output from that expenditure (feedstock rule).
- Expenditure for which you have received an R&D tax credit from another country
- If your eligible expenditure is less than $50,000, expenditure or loss that is not for an approved research provider (ARP).


R&D Tax Incentive
R&D Tax Incentive (RDTI)
- The RDTI offers a 15% tax credit on eligible R&D expenditure.
- It applies across a wide range of industry sectors and to a number of eligible R&D activities.
- Eligible R&D expenditure between $50,000 and $120 million per year can be claimed (some exceptions apply).
- A limited form of refund ability applies for 2019/2020, mainly for smaller businesses that are R&D intensive and pay little or no income tax. A more comprehensive policy will be in place from 2020/2021.
- The Government will invest $1 billion into the RDTI over the next four years to encourage New Zealand businesses to spend more on R&D.
- The RDTI can be claimed alongside the R&D loss tax credit. It can also be claimed alongside the other R&D funding options listed below, but not for the same expenditure or for required co-funding.
- The RDTI is jointly administered by Inland Revenue and Callaghan Innovation. Visit www.rdti.govt.nz
Getting Started Grants
A Getting Started Grant is for businesses that are early stage or new to R&D.
- It offers up to $5,000 for launching an R&D project and navigating roadblocks to commercialisation.
- It covers 40% of costs for R&D conducted in New Zealand.
- A one-off payment is provided at the end of the project.
- You must be a company, limited partner or Māori incorporation/trust.
- Visit Callaghan Innovation for more.
Project Grant
A Project Grant covers up to 40% of eligible R&D project costs for businesses new to, or expanding, R&D in New Zealand.
- It’s available if you have been performing R&D for less than three years, or have spent less than $800,000 on average each year for the last three years.
- You will receive payment in monthly or quarterly arrears.
- You must be a company, limited partner or Māori incorporation/trust.
- Visit Callaghan Innovation for more.
- NOTE: If you have a Callaghan Innovation Project Grant then you are not able to claim the R&D Tax Incentive (RDTI) on any expenditure relating to the R&D activities funded by the Project Grant. Read the Fact Sheet for Project Grant recipients for further details.
R&D loss tax credit
R&D loss tax credit
- Up to 28% of a business’ tax losses from eligible R&D expenditure may be cashed out (refunded) instead of carrying forward to the next income year.
- A maximum allowable value of $476,000 applies in the 2019/2020 tax year.
- You can claim the R&D loss tax credit with the RDTI for the same expenditure.
- Visit Inland Revenue for more.
Student Grants
An R&D Experience Grant allows you to hire a tertiary student to support your R&D work during their summer break.
- The student must be NZQA level 7-10 in science, technology, engineering, design or business in New Zealand. They must not be employed by the business or have undertaken more than two R&D Experience Grants there before.
- The business receives funding of $8,460 plus GST for 400 hours of full time work.
- It’s available if you have an active R&D programme and are a company, limited partner or Māori incorporation/trust.
- Visit Callaghan Innovation for more.
An R&D Fellowship provides businesses with advanced research at PhD or Masters level to help solve an R&D problem.
- The research is undertaken on site at both the business and the student’s university, and is jointly supervised.
- Students receive a stipend (maximum $26,000 p.a.) and a fee (of $4,500 p.a.) is paid to the university to support their hosting role.
- Funding is for research activity only, for a maximum of three years for PhD students and two years for Masters students.
- The student must be enrolled at research Masters or PhD level in science, technology, engineering, design or business in New Zealand.
- It’s available to businesses that have an active R&D programme. The business must be a company, limited partner or Māori incorporation/trust.
- Visit Callaghan Innovation for more.
An R&D Career Grant provides funding for an internship. It allows a PhD or Masters graduate to gain six months experience helping solve an R&D problem.
- The business receives funding for the first six months of the student’s annual salary up to $30,000 for a Masters graduate and up to $35,000 for a PhD graduate.
- The student must be about to complete, or have completed, a degree in science, technology, engineering, design or business in New Zealand.
- They must have completed their course of study less than 12 months ago and cannot already be employed in the industry.
- You must have an active R&D programme and be a company, limited partner or Māori incorporation/trust.
- Visit Callaghan Innovation for more.








