If your business is developing new solutions or improving existing processes, you could be missing out on valuable tax credits by not claiming the Research & Development Tax Incentive (RDTI).
The RDTI is designed to encourage innovation by providing a 15% tax credit on eligible R&D expenditure, whether the activity takes place in New Zealand or overseas. Many businesses don’t realise they qualify — often because they assume R&D only applies to labs, scientists, or pharmaceutical companies.
With key deadlines approaching, now is the time to assess whether your business is eligible.
For the 2026 income year, businesses with a standard balance date of 31 March must submit their application by 30 June.
What qualifies as R&D?
One of the biggest misconceptions about R&D is how narrow people think it is.
R&D isn’t limited to pharmaceutical companies. It can apply to any business creating new knowledge or improving existing processes, products, or services, provided the activity involves resolving scientific or technological uncertainty.
The RDTI is a government-funded incentive aimed at businesses that are pushing boundaries, whether that’s developing new systems, improving efficiency, or solving technical problems that don’t have obvious answers.
To qualify, your activity must:
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be undertaken to create new knowledge, or new or improved processes, services, or goods
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follow a systematic approach
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aim to resolve scientific or technological uncertainty
At least one core R&D activity is required to claim the tax credit.
A systematic approach means a methodical and planned process to test possible solutions to an identified uncertainty. What this looks like will vary by industry and by the nature of the problem you’re trying to solve.
How does the R&D Tax Incentive work in New Zealand?
To claim the RDTI, businesses must first register through myIR.
There are two key filings involved:
1. General Approval application
This is the upfront application where you document:
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what you are trying to achieve
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the uncertainty you are addressing
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the steps you will take to resolve it
Once approved, this confirms you have an eligible R&D project.
2. Supplementary Return
After approval, you’ll submit a Supplementary Return capturing the eligible R&D expenditure incurred during the year. Costs are typically grouped into categories such as:
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employee-related costs
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overheads
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depreciation
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contractor costs
What expenditure can be claimed?
To be eligible, expenditure must be:
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directly related to, required for, and integral to the R&D activity, and
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listed as eligible expenditure (and not excluded under ineligible categories)
In practice, the largest component of R&D expenditure is often labour. If your employees are working on developing new solutions or improving processes, a portion of their time may be claimable.
In addition to directly attributable labour costs, businesses may also be able to claim relevant overheads, such as rent and other costs required to carry out the R&D activity.
There are specific rules around R&D undertaken in commercial production environments, contracted R&D, and foreign R&D. Our advisors can guide you through these nuances.
Key timing and deadlines
General Approval application
Must be submitted no later than the last day of the third month after the end of the first income year relating to the application. For a September balance date, IRD has made an exception due to the deadline falling on 31 December. This change extends the deadline to 15 January, the following year. For a 31 March balance date, this means 30 June.
To reduce administrative effort, businesses can apply for approval covering up to three years.
Supplementary Return
Due within 30 days of your income tax return due date. If you have a tax agent or an extension of time, the Supplementary Return is due 30 days after that extended deadline.
Once approved, R&D tax credits are paid in accordance with Inland Revenue’s ordering rules.
Important considerations
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Late applications are not accepted. If you think your business may qualify, it’s best to apply sooner rather than later.
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You can submit multiple General Approval applications — there is no limit on the number of projects you can claim.
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Strong record-keeping is essential. Tracking employee time and eligible expenditure throughout the year will make the process smoother and ensure you can respond if Inland Revenue requests supporting documentation.
If you’d like to understand whether your business qualifies, or need support with the application process, please contact one of our client managers.