Research & development tax incentive vs. growth grant

Research & development tax incentive vs. growth grant

In this update, we look at the differences between the Callaghan Growth Grant and the Research and Development (R&D) Tax Incentive.


Key contact

Gwenan Riley - KPMG NZ - Partner

Partner - Innovation & Growth

KPMG in New Zealand

Research and Development

The comparison has been prepared as the R&D Tax Incentive (R&D TI) takes effect in this 2019-20 tax year and to address some expressed apprehension over the change in Government support to businesses active in R&D. The comparison is also relevant to a number of businesses, who are considering when they should transition from Grant funding to the Tax Incentive.

Government officials (Inland Revenue, Callaghan Innovation and MBIE) have designed what we believe to be a good instrument in the R&D TI – drawing in the experiences of the previous R&D TI (2008-09), the experiences of other jurisdictions’ R&D TI’s and the prevailing Callaghan Growth Grant regime; - though the final proof lies in the IRD operational pudding..

Given the Grant vs. Tax Incentive nature of the instruments, differences prevail in the detail and operations of the Growth Grant vs. the R&D TI – though when compared in entirety, the initial bad press the R&D TI has received may not be justified.

Refundability for businesses in pre-profit/loss making scenarios and claim payment frequency are arguably the notable attributes that the Growth Grant offers relative to the R&D TI. However, beyond the interim arrangements for the 2019-20 income year for entities in these situations, Inland Revenue is proposing a more comprehensive refundability facility that will use the quantum of a claimant’s total PAYE payments as the mechanism to limit refund payments to a loss making entity.

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