There are some rules around what types of R&D expenditure are eligible for claiming the RDTI.
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.
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.
You can claim your costs for employees involved in eligible activities, including:
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.
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.
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.
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.
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.
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.
You can’t claim the RDTI on the following: