A new research and development tax incentive introduced today will go a long way to helping inject even more growth into the tech sector, according to NZTech chief executive Graeme Muller.
Muller said a reset of the minimum level to $50,000 and increase in the rate to 15 per cent will see open the benefits of the program to a broader range of firms.
“New Zealand’s new R&D incentive scheme places us competitively with other leading tech nations such as Israel and the Netherlands who have very similar rates," he said.
“The most positive change is the way R&D is being defined, removing a focus on scientific research to instead look at systematic approaches to solving scientific and technical uncertainty.
"This and other work the government has undertaken with tech firms to understand how they operate has resulted in a set of rules that should support the growing software sector."
Muller said introducing "refundability" of tax credits as a way to address the challenges of stimulating R&D in pre-profit firms was a clever way of enabling some of our highest growth tech firms to engage.
"This has been introduced for one year initially which will provide time for further consultation with the market to ensure an appropriate scheme is designed," he added.
"Delaying the closure of the current growth grant scheme and allowing current recipients to apply for extensions should mean that most firms undertaking research via this method have an opportunity to complete the research or transition in time to the tax incentive scheme with little negative impact on their business."
Research, Science and Innovation Minister Megan Woods and Revenue Minister Stuart Nash announced the design of the R&D tax incentive with significant changes to the program originally proposed.
"This is a huge opportunity for businesses to invest in R&D, which will help us increase our productivity and boost wages," Woods said.
"We pride ourselves on being an innovative country, but our spending on R&D lags behind many of our international competitors, and this Government is not content to languish at the bottom of the table. That’s why we’ve set aside $1 billion for this incentive."
Muller said, while there is fine tuning to do, the proof of the program's success will be in its implementation.
"Tax guidelines always take a bit of time to bed in however with the government position being one of ongoing consultation and engagement we are confident that this is the start of a new era for R&D growth in New Zealand and further acceleration of the fastest growing sector," he added.