The Research and Development Tax Incentive gives a tax credit equal to 15 percent of eligible R&D expenditure. It is administered jointly by Inland Revenue and Callaghan Innovation, and it is claimed through the tax system rather than applied for as a grant.
A great many New Zealand businesses doing genuinely eligible work never claim it, usually because they do not think of what they do as research.
The eligibility test
The core question is whether the activity seeks to resolve scientific or technological uncertainty — uncertainty that a competent professional in the field could not resolve without systematic investigation.
Three misconceptions cause most of the incorrect self-assessment:
- It does not require novelty to the world. The uncertainty must be genuine, not previously published knowledge you simply have not looked up. But solving a problem that others have solved privately can still qualify.
- It is not commercial or market risk. Uncertainty about whether customers will buy something is not scientific or technological uncertainty.
- It is not restricted to laboratories. Software development, manufacturing process improvement, agricultural technique development and engineering design all routinely qualify.
Activities are divided into core R&D activities, which seek to resolve the uncertainty through a systematic approach, and supporting activities, which have the only or main purpose of supporting a core activity.
The minimum spend
There is a $50,000 minimum of eligible expenditure per year. Below that, no claim.
The important exception: expenditure incurred with an approved research provider is not subject to the minimum threshold. A small business commissioning work from a university, Crown research institute or other approved provider can claim without meeting the $50,000 floor, which is worth knowing before deciding you are too small.
What expenditure counts
Broadly, the costs of performing eligible R&D — salary and wages for people conducting or directly supporting it, contractor costs, consumables used, depreciation on assets used, and overheads apportioned on a reasonable basis.
Common exclusions catch people out: expenditure on acquiring land or buildings, most capital costs, professional fees for preparing the claim itself, and expenditure funded by certain government grants.
Where staff split time between R&D and ordinary work, apportionment must be reasonable and supportable. Timesheets or an equivalent contemporaneous record are the practical answer, and reconstructing the split at year end is where claims weaken.
The approval process
Most claimants need General Approval for their R&D activities before claiming. The deadline is generally the seventh day of the second month after the end of your income year — for a standard 31 March balance date, that falls in the following months rather than at year end.
The practical implication is that this is not a decision you can leave until you file your return. If you are doing eligible work this year, the approval process needs to start during the year.
Significant performers with large expenditure have a separate pathway, and there are specific rules for businesses in a loss position, including the ability to have credits refunded rather than carried forward, subject to conditions and caps.
Record keeping is what determines a claim’s survival
The recurring reason claims are reduced on review is not ineligibility. It is that the business cannot evidence what it did.
What should exist contemporaneously:
- A description of the uncertainty you were trying to resolve, written at the time.
- The hypothesis or approach taken, and why.
- Records of tests, iterations and results — including the failures, which are frequently the best evidence of genuine uncertainty.
- Time records allocating people to activities.
- Cost records tying expenditure to the activities claimed.
Engineering notebooks, version control history, test logs and project documentation all serve. The requirement is not extra paperwork so much as keeping what the work already generates.
Changes signalled
Budget 2026 announced proposed changes to the RDTI intended to keep it well targeted. Anyone planning around the incentive over multiple years should confirm the current settings rather than relying on a prior year’s position.
Where to start
The dedicated site at rdti.govt.nz publishes eligibility guidance, worked examples and the application process, and Inland Revenue publishes detailed technical guidance. Both are free.
For a first claim of any size, specialist advice generally pays for itself — not to find eligibility that is not there, but to frame genuine activity in the terms the legislation uses.
General information only, not tax advice.
