Changes to R&D Tax Credit Policy a Good Step Forward

3 October 2018

The Government has announced their final Research and Development (R&D) Tax Credit policy, following consultation with the public and businesses. The Government has listened to some of the concerns of manufacturers and made some positive improvements to the policy.

“We are pleased to see that the Government has listened to a number of the concerns raised in the consultation period of the R&D tax credit policy and have made some changes – these represent a positive step forward to getting an effective R&D policy which can help incentivise and support even more innovation in our manufacturing businesses." Said Dr Dieter Adam, Chief Executive of The Manufacturers’ Network.

“We still need to go through the fine detail to see how this policy will impact manufacturer's R&D activities, but we are happy to see changes in the rate, threshold and definition of R&D expenditure.

“The move to increase the overall rate from 12.5% to 15% of eligible R&D expenditure will make the incentive more worth the effort for larger companies who were previously getting growth grants, and for smaller companies who previously did not receive any support. We do, however, believe that the rate should be increased to 20%, as expressed in our submission. This would better align our system with the level of R&D support available in competitor countries and provide additional support to reach the Government’s target of R&D spending at 2% of GDP – we will continue to speak to the Government about this point.

“The change of the minimum threshold of R&D expenditure from $100,000 to $50,000 is great to see – while this could potentially move lower in the future, this change removes a barrier for smaller sized manufacturing companies.

“It is also positive to see some changes around the definition of eligible R&D expenditure – the previous proposed definition was rigid and had the potential to lock out some forms of process innovation, which plays a critical role in the R&D activities of manufacturing firms. We want to see the Government reiterate their commitment to supporting process innovation, which allows manufacturing firms to stay competitive while producing in New Zealand and carve out strong niches in domestic and global markets.” Said Dr Adam.

ENDS

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