Changed Research and development (R&D) tax credit rules, which came into effect at the start of the 2016 income year, can help business cashflow.

The R&D Tax Credit regime allows a “cash out” of an organisation’s R&D tax losses. The cashed-out amount must be repaid from future income.

In general, a taxpayer will be eligible for the cash out if they:

  • Are a New Zealand tax resident company
  • In a tax loss position
  • Maintain continuing ownership of intellectual property
  • Have a “wage intensity” of at least 20 percent (calculated as total R&D labour expenditure ÷ total labour expenditure).

The “cash-out” is subject to maximum caps and will be clawed back in certain circumstances such as a substantial shareholding change or the disposal of R&D assets. Only expenditure that doesn’t meet the threshold to be capitalised as an intangible asset qualifies for the tax credit. If you think you may be eligible please contact us.