TechNZ and Business NZ are supporting the government's reshaped R&D incentive schemes.
BusinessNZ chief executive Kirk Hope said a new incentive for R&D by companies that have yet to make a profit, along with Callaghan Project Grants and the current R&D tax credit, would provide innovation incentives to a broader range of businesses.
The rebate, up to the level of payroll tax paid in the same year, will be available for new and loss-making firms, the government announced yesterday.
"In the past, small start-ups and businesses engaging in the risky process of developing something new were not eligible for R&D tax relief if they were not making a profit," Hope said.
"This new incentive will help foster innovation among currently loss-making businesses and create a fairer scheme for greater innovation in the New Zealand economy generally."
The Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill, introduced to Parliament in late June, means more businesses claiming the R&D tax incentive will be eligible for refunds of their R&D tax credits from the 2020/2021 tax year onwards.
Under the plan, refundable tax credits would generally be available up to the amount of payroll tax paid by the business in the same year.
At the moment a pre-profit firm in year one of the scheme would only be able to receive a maximum pay-out of $255,000.
New Zealand tech organisations, through NZTech, are also happy to see the government continuing to improve its R&D scheme.
Chief executive Graeme Muller said the organisation had been supportive of the tax credit scheme but concerned that there were still complex issues such as pre-profit access that needed to be addressed.
“The government promised to continue to evolve the scheme so the announcement of details that provide some pre-profit firms with access is a great step in the right direction," Muller said.
It was clear that the intent is positively focused on ensuring our fastest growing hi-tech and software sectors can access the tax credits system to help encourage them to invest further in R&D, he said.
“There are still a few complex issues that need further discussion such as the definition of software development and we are pleased the Minister is keen to continue working with the sector to maximise the impact of the tax credit system for New Zealand’s prosperous growth."
Statistics NZ data shows computer services and scientific and tech services make up 35 percent of all R&D investment. Computer services companies alone invested $586 million in R&D in 2018, an increase of $150 million.
The tech sector is made up of more than 20,000 firms, most of them small businesses, yet they contribute around $16 billion to GDP and close to $7 billion in exports, making them the country’s third largest export sector.