Research and development (R&D) has increasingly become an essential part of many businesses growth plans. When R&D is well-planned and executed, it enables businesses the creation of better and innovative products or services and the improvement of operational processes. In this article, we provide an overview of the different types of government R&D grants and funding availalbe to eligible business in New Zealand.

Whether your business is a startup, a developing technology company, or a mature business, there are government grants and funding currently available to help you take innovative new products or services to the next level. These grants and funding are designed to fill the funding gap where companies either lack the necessary resources, or private funding sources might consider their market or types of projects being too risky to invest in.

What R&D grant and funding packages are available to your business?

We summarise below four primary R&D funding packages available under the current government, each of which are designed with differing criteria for eligibility, allowance on R&D expenditure and baselines.
 

1.     R&D Tax Credits (RDTI) 15 cent tax credit

The RDTI operates as a tax credit, rewarding businesses and individuals who perform R&D activities. The sole purpose of R&D is to seek to solve scientific or technological uncertainties. To be eligible for RDTI, you must spend at least $50,000 a year and up to $120 million, on eligible R&D. The RDTI allows qualifying businesses to claim a 15% tax credit on their eligible R&D expenditure. It operates by offsetting tax to pay and in some circumstances, it is refundable even for loss-making businesses.

The regime is administered by the Inland Revenue Department (IRD) and applies from the 2020 tax year, with a more comprehensive system in place for the 2021 tax year. For the 2020 tax year, you will need to first enrol in this regime through your IRD online account and prepare your R&D supplementary return/application form to support your claim. If you are currently linked to a tax agent and haven’t filed your 2020 Income Tax Return yet, you will have up to 30 days of your Income Tax Return due date to lodge your supplementary return.

2.     R&D Loan

The purpose of the R&D Loan Scheme under Callaghan Innovation is to help businesses continue their R&D programmes in the face of Covid-19 impacts. Businesses impacted by Covid-19 may be able to apply for the R&D loan for up to $400,000. The loan will be charged with interest at 3% per annum from the start of the loan. However, interest will be waived if the loan is repaid in full within the first year. Repayment instalments are not compulsory for the first three years. The maximum loan period is 10 years.

To be eligible, you must be able to show that your business has experienced a 30% or greater drop in expected sources of funding to support eligible R&D activities over the year ending 30 June 2021. You must also have had an eligible R&D plan in place before 26 March 2020 and plan to spend at least $50,000 on eligible R&D.

3.     Getting Started Grants

Also administered by Callaghan Innovation, the Getting Started Grants are designed to support smaller businesses to kickstart their R&D activities, and assist businesses navigating through R&D roadblocks. Under this scheme, your business will receive up to 40% of your eligible R&D project costs, up to $5,000 (based on a quotation) for your R&D activities done in New Zealand. You can apply at any time.

4.     Project Grants

Next level up from the Getting Started Grants are the Project Grants which are designed to help expand your R&D expertise and transform your business into a stable and larger R&D performer. To be eligible, businesses must meet financial and due diligence requirements. In particular, your business must have been performing R&D for less than three years or have spent less than $800,000, on average, on R&D each year for the last three consecutive years. On approval, your business will typically receive 40% of your eligible R&D project costs, and generally for R&D activities done in New Zealand. You can apply at any time.

What’s next for your business?

Whether you are planning to engage in R&D, in the process of R&D, or have already commercialised your R&D, it is no better time than now to talk to our in-house grants team of Bellingham Wallace. Our experienced team is here to guide you through each step of the R&D application process, ensuring your business is accessing the right R&D grant or funding efficiently.

By Graham Lawrence (Director)

and Sharon Chan (Junior Associate)