Businesses have until 31 August to apply for the research and development tax incentive

Katherine Ong

Due to COVID-19 and further updated guidance released in March 2021 on the definition of ‘eligible R&D activities’, the deadline for submitting a claim for the research and development (R&D) tax incentive (RDTI) for the 2020 income year has been extended to 31 August 2021.

So, if your business has spent more than $50,000 on R&D expenses during the 2020 income year, you should consider applying for the RDTI, by filing an R&D supplementary return, even if your business’ 2020 tax return has already been filed.

What is the RDTI?

The RDTI offers a 15 percent tax credit on eligible R&D expenditure of up to $120m for eligible businesses. Depending on your business’ performance, the RDTI will either be offset against its income tax liability or may be refundable.

How do I know if my business is eligible for the RDTI?

Your business may be eligible to receive the RDTI if your business conducted R&D activities which satisfy the following requirements during the 2020 income year:

  • Performed in New Zealand;
  • Seeks to resolve ‘scientific or technological uncertainty’ – scientific or technological uncertainty exists when knowledge of whether something is scientifically possible or technologically feasible, or how to achieve it in practice, is not publicly available or deducible by a competent professional working in the field;
  • Follows a systematic approach; and
  • Seeks to create new knowledge, or new or improved processes, services or goods.

How do I claim the RDTI?

The process for claiming the RDTI is somewhat different in the 2021 income year.

To apply, you’ll need to submit a general approval application by 31 August 2021. This application is reviewed by Callaghan Innovation (working in collaboration with Inland Revenue) to assess the eligibility of the R&D activities disclosed in the general approval application.

If a general approval application is not filed by 31 August 2021, your business will not be able to claim an RDTI for the 2021 income year. So, with only a month to go until the deadline, speak to your adviser or contact the Crowe Tax Advisory team for assistance with your RDTI application.