R&D Tax Incentive in-year payments have recently launched, offering an option of an interest-free government loan for the amount of your expected R&D credit. This enables businesses to get support closer to when R&D costs are incurred, rather than waiting for the R&D tax credit to be issued in the following year.
Opting into RDTI in-year payments
Since its implementation in 2019-2020, the Research and Development Tax Incentive (RDTI) regime has supported a multitude of businesses across diverse industries and at various stages of their life cycle, from start-ups to established industry leaders in New Zealand.
The tax incentive is currently administered in the form of a tax credit, providing a 15% credit to businesses performing eligible research and development activities. Currently, businesses can expect to access the RDTI credit or refund as a single lump sum after the income tax return and RDTI Supplementary Return have been filed and assessed. Generally this process can take over a year for businesses to receive their tax credit causing a mismatch in the timing of the benefit received and the expenditure incurred for their R&D activities.
Though tax-paying companies can manage the cash flow impact by factoring the credit into their provisional tax payments, loss-making companies do not have this ability.
In that light, The Ministry of Business, Innovation and Employment (MBIE) have recently implemented a new in-year payment scheme that will allow businesses to access up to three cash payments during the year.
For taxpayers who have filed their RDTI Supplementary Return by the due date, the loan is due on the earlier of either:
- one month after Inland Revenue has approved or declined your RDTI Supplementary Return, or
- six months after the due date of your RDTI Supplementary Return.
If the RDTI Supplementary Return has not been filed by the due date, the loan is still due one month after the due date of the RDTI Supplementary Return.
The loan will be interest-free up until one month after the relevant due date above. Interest will be charged on the loan at the Use of Money interest applicable at the time from one month after the due date and a repayment plan will be arranged if the loan is not repaid by the relevant due date.
What you’ll need to do to prepare
For businesses who have not submitted an RDTI general approval application yet, we recommend filing this as soon as possible after the start of the income year where the business expects to conduct eligible R&D activities. You cannot draw down any loan amounts until this submission is approved.
To opt into the in-year payments scheme, businesses will need to register and create an account through the TMNZ website.
Details required include the following:
- Estimate of potential loan amount, based on estimated expenditure on RDTI application
- NZBN number and other information to enable Anti Money Laundering (AML) and Due Diligence checks to be carried out.
Key considerations and how we can help
For businesses who have existing RDTI general approvals for their R&D activities, we recommend reviewing existing record-keeping and internal processes for collating and reporting R&D expenditure to accurately estimate your R&D expenditure and loan amount.
If you are new to the RDTI scheme and have not applied for the general approvals yet, our team can help assess your eligibility for the RDTI scheme and assist in the preparation of your RDTI claim. This includes identifying eligible R&D activities, applying potential legislative activity and expenditure exclusions, and assisting with the calculation of eligible R&D expenditure.
If you have already submitted your general approval applications, our team can help you navigate the new in-year payment scheme and assist in streamlining your R&D records and processes for a smooth transition.
