Why do R&D?
For the purposes of the RDTI, there is a specific statutory definition of ‘R&D’ which is not the same as the commercial, engineering or accounting definitions. The tax credit is not just for scientific research but also for development activity that meets the eligibility criteria.
There are clear criteria around what does and doesn’t qualify as eligible R&D for claiming the RDTI and these should be considered in detail before launching a project.
Why do R&D?
There are compelling reasons for businesses to consider doing more R&D:
- R&D is a good investment. A 2017 review of economic studies around the world found the long-term payback on R&D spend is in the order of 20% a year.
- New Zealand Productivity Commission research (2017) showed firms that adopt an ‘all-of-firm innovation mindset’ and focus on continually improving their internal processes and structures while also innovating through R&D, get exponentially better productivity outcomes than those that innovate in just one area.
- While there is no guaranteed return on investment (ROI) for a business that spends money on R&D, the RDTI can now help eligible businesses to mitigate some of this risk by reducing their income tax bill.
A business case for investing in R&D can be found in our News and Insights section. It provides further evidence that R&D creates opportunities for your business to gain a competitive advantage, helping it grow.