R&D Tax Incentive NZ: Essential 2026 Guide for Businesses

If your business invests in research, technology, product development or solving technical problems, you may be able to claim the R&D tax incentive NZ scheme.

The New Zealand Research and Development Tax Incentive provides a 15% tax credit on eligible R&D expenditure, subject to the relevant eligibility rules and expenditure limits.

In 2026, the Government has also proposed several changes to the R&D Tax Incentive, including in-year payments, changes affecting internal software development, expanded treatment of mining R&D and greater administrative flexibility.

These proposed changes are important for businesses planning their R&D expenditure and tax position for future income years.

What Is the R&D Tax Incentive NZ?

The R&D tax incentive NZ is a government tax credit designed to encourage businesses to undertake research and development in New Zealand.

The incentive is available to eligible businesses carrying out qualifying R&D activities and can provide a tax credit equal to 15% of eligible R&D expenditure.

The purpose of the scheme is not simply to reward businesses for creating something new. The R&D activity generally needs to address scientific or technological uncertainty and satisfy the applicable requirements for eligible R&D activities.

The incentive can apply across a wide range of industries, including technology, manufacturing, engineering, software, biotechnology and other businesses undertaking qualifying research and development.

According to Inland Revenue, the current scheme has a minimum eligible R&D expenditure threshold of $50,000 per year and a maximum eligible expenditure threshold of $120 million, subject to the applicable rules.

How Much Is the R&D Tax Incentive Worth?

The current R&D tax incentive NZ rate is 15% of eligible R&D expenditure.

These examples illustrate the 15% rate only. The amount a business can actually claim depends on whether its activities and expenditure satisfy the detailed R&D Tax Incentive rules.

Who Can Claim the R&D Tax Incentive NZ?

A business must satisfy several requirements before it can claim the R&D tax incentive NZ.

Generally, you need to consider:

• whether the entity is eligible to participate;
• whether the activities qualify as R&D;
• whether the expenditure is eligible;
• whether the R&D is performed in New Zealand or meets the relevant overseas R&D requirements;
• whether the business owns or has the required rights to the R&D results;
• whether the expenditure thresholds are satisfied; and
• whether the required applications and returns are filed on time.

Inland Revenue states that businesses must have eligible R&D activities, eligible expenditure, eligible entity status and the required supplementary and income tax returns to claim the incentive.

What R&D Activities Can Qualify?

One of the most important parts of an R&D tax incentive NZ claim is determining whether the underlying activity qualifies.

R&D generally involves a systematic approach to resolving scientific or technological uncertainty or creating new knowledge or improving products, processes or services.

For example, qualifying R&D could potentially involve:

• developing a new technology;
• creating a new or significantly improved product;
• developing or testing a new technical process;
• solving a technical problem where the solution is not readily available;
• conducting experiments to overcome technological uncertainty;
• developing innovative manufacturing processes; or
• developing qualifying software that addresses technical uncertainty.

However, simply calling an activity “R&D” does not make it eligible. The activity needs to satisfy the statutory requirements.

What R&D Expenditure Can Be Claimed?

Eligible expenditure is another major part of the R&D tax incentive NZ calculation.

Depending on the circumstances, eligible expenditure can include costs such as:

• employee salaries and wages relating to eligible R&D;
• certain employee-related costs;
• depreciation of assets used for eligible R&D;
• goods and services used in R&D;
• certain overhead costs;
• materials used in eligible R&D activities; and
• certain R&D services provided by contractors.

Where an employee spends only part of their working time on R&D, the business needs a reasonable method for determining the portion of their costs relating to eligible R&D.

Timesheets, project records and other supporting information can be important when demonstrating how expenditure has been allocated.

What R&D Costs Cannot Usually Be Claimed?

Not every innovation or technology cost qualifies for the R&D tax incentive NZ.

Examples of excluded expenditure can include:

• the GST input portion of expenditure;
• certain financing and interest costs;
• certain acquisition costs for technology;
• certain commercialisation expenditure;
• expenditure outside the applicable thresholds;
• certain internal software development expenditure;
• expenditure that has already been funded through certain government grants or other tax incentives; and
• other expenditure specifically excluded by the R&D rules.

Businesses should therefore assess each category of expenditure rather than simply applying 15% to their total technology or development budget.

Does Software Development Qualify for the R&D Tax Incentive NZ?

Software development can qualify for the R&D tax incentive NZ when the relevant activities and expenditure meet the eligibility requirements.

However, the rules distinguish between different types of software development.

For example, software developed primarily for sale or as an integral part of goods sold externally is treated differently from certain internal software development.

Under the current rules, eligible non-administrative internal software development expenditure is subject to a $25 million cap.

Internal software developed for the purpose of internal administration can be excluded from the incentive.

What Is Changing for Internal Software Development?

One of the significant proposed R&D tax incentive NZ changes is a reduction in the cap for eligible non-administrative internal software development expenditure.

The proposed legislation would reduce the internal software expenditure cap from $25 million to $3 million per business per income year.

The proposed change is intended to apply from the 2027–28 income year.

Businesses with substantial internal software development programmes should therefore review how their development expenditure is classified and documented before the proposed rules take effect.

What Are the Proposed 2026 Changes to the R&D Tax Incentive NZ?

The 2026 tax Bill contains several proposed changes to the R&D tax incentive NZ.

The key proposals include:

1. In-year R&D payments based on expected R&D tax credit entitlements.
2. Greater administrative flexibility for late R&D filings and minor administrative errors.
3. Changes to mining R&D eligibility to expand the range of R&D expenditure that can qualify.
4. A reduction in the internal software development cap from $25 million to $3 million per business per year.

The Bill was introduced on 10 September 2026. As of 15 September 2026, it was at the first-reading stage, so businesses should not treat the proposed changes as enacted law until the legislative process is complete.

What Are In-Year R&D Tax Incentive Payments?

Currently, businesses generally claim the R&D tax incentive NZ through the relevant tax process rather than receiving the credit throughout the year as R&D expenditure is incurred.

The proposed reforms would introduce in-year R&D payments.

Under the proposal, eligible businesses could receive payments during the income year based on their expected R&D tax credit entitlement rather than waiting until after the year has ended.

The proposed system is intended to improve cash flow for businesses undertaking R&D, particularly businesses that need to fund ongoing development work.

The proposed in-year payments would be subject to eligibility and reconciliation rules, including limits connected with labour-related taxes paid by the business.

The proposed in-year payment system is intended to apply from the 2027–28 income year.

Why Could In-Year Payments Matter for Startups?

For an early-stage technology or product business, R&D can require significant expenditure before a product generates meaningful revenue.

Under the proposed R&D tax incentive NZ changes, eligible businesses could potentially receive support during the year rather than waiting until after the normal claim process.

This could make cash-flow planning easier for businesses that have significant eligible R&D costs.

However, receiving an in-year payment would not automatically mean that every development cost qualifies. Businesses would still need to satisfy the relevant R&D eligibility and documentation requirements.

What Is Changing for Mining Businesses?

The 2026 Bill also proposes changes to the treatment of R&D expenditure for mining businesses.

The proposal would expand the range of R&D expenditure that mining businesses can claim under the incentive so that their treatment is more aligned with other industries.

The proposed mining-related changes are intended to apply from the 2027–28 income year.

Mining businesses undertaking potentially eligible R&D should review the proposed rules carefully rather than assuming that all mining-related expenditure will qualify.

Can Startups Claim the R&D Tax Incentive NZ?

Yes, a startup can potentially qualify for the R&D tax incentive NZ if it satisfies the relevant eligibility requirements.

Being a startup does not automatically make an R&D project eligible, but a new business developing technology or solving genuine technical problems may be within the scope of the scheme.

Startups should pay particular attention to:

• documenting the technical problem being investigated;
• recording experiments and development work;
• tracking employee time spent on R&D;
• separating eligible R&D costs from normal business expenses;
• retaining invoices and supporting records; and
• understanding the approval and filing requirements.

Can You Claim the R&D Tax Incentive for Internal Software?

Potentially, but the treatment depends on the type of internal software development.

Software developed solely for internal administration can be excluded, while certain other internal software development can be eligible subject to the current expenditure cap and other requirements.

The proposed 2026 changes would reduce the applicable cap for eligible non-administrative internal software development from $25 million to $3 million per business per year.

If your business is developing internal software at scale, it is worth reviewing the treatment of the expenditure before the proposed changes apply.

How Do You Apply for the R&D Tax Incentive NZ?

The R&D tax incentive NZ involves more than simply adding an R&D expense to an income tax return.

A typical process involves:

1. Determining whether the business is an eligible entity.
2. Identifying potentially eligible R&D activities.
3. Determining which expenditure relates to those activities.
4. Registering for the R&D Tax Incentive.
5. Obtaining the required approval for the R&D activities.
6. Maintaining appropriate supporting records.
7. Calculating the eligible expenditure.
8. Submitting the required R&D supplementary return.

Inland Revenue provides a registration process through myIR and separate guidance for approval and R&D supplementary returns.

What Records Should Businesses Keep?

Good documentation is one of the most important parts of an R&D tax incentive NZ claim.

Businesses should consider keeping:

• project descriptions;
• technical problem statements;
• development plans;
• experiment results;
• testing records;
• timesheets or other evidence of employee R&D time;
• supplier invoices;
• contractor agreements;
• software development records;
• project management documentation; and
• calculations showing how eligible expenditure was determined.

The records should allow the business to explain what R&D was undertaken, why it qualified and how the claimed expenditure was calculated.

R&D Tax Incentive NZ Example

Suppose a technology company spends $200,000 on eligible R&D during an income year.

If all $200,000 qualifies and the business satisfies the other requirements, the 15% credit would be:

$200,000 × 15% = $30,000

The business could therefore have a potential R&D tax credit of $30,000, subject to the detailed rules and the business’s particular tax position.

If only $120,000 of the expenditure qualifies, the illustrative credit would instead be:

$120,000 × 15% = $18,000

This is why accurately identifying eligible expenditure is critical when preparing an R&D claim.

Common R&D Tax Incentive NZ Mistakes

Businesses can make costly mistakes when they assume that every innovative project automatically qualifies.

1. Treating all technology spending as R&D

Buying software, implementing technology or upgrading business systems does not automatically qualify.

2. Failing to document technical uncertainty

The business should be able to explain the technical problem it was trying to solve and the development process used.

3. Claiming normal business activity

Routine development, commercial activity and ordinary business improvements may not satisfy the R&D requirements.

4. Not tracking employee time

Where employees divide their time between R&D and ordinary business activities, the R&D portion needs to be calculated using a reasonable method.

5. Ignoring software-specific rules

Internal software development can have specific eligibility restrictions and expenditure limits.

6. Waiting until the tax return to investigate eligibility

R&D documentation is much easier to maintain when it is created during the project rather than reconstructed months later.

7. Assuming the proposed 2026 changes are already law

The 2026 changes were introduced in a Bill and remain subject to the legislative process. Businesses should distinguish between the current rules and proposed future changes.

How DFK Orb360 O’Halloran Can Help

Understanding the R&D tax incentive NZ can be difficult when your business combines technical development, employee costs, contractors, software and normal commercial activities.

DFK Orb360 O’Halloran can help businesses assess the financial and tax aspects of their R&D activities, including:

• reviewing potentially eligible R&D expenditure;
• assessing employee and contractor costs;
• reviewing software development expenditure;
• helping identify documentation requirements;
• supporting R&D tax calculations;
• considering the impact of proposed tax changes;
• integrating R&D tax considerations into broader tax planning; and
• working with your business and other relevant advisers where specialist R&D documentation or technical evidence is required.

If your business is investing heavily in product development or technology, reviewing the R&D tax position early can help you avoid leaving potentially available tax credits unclaimed.

R&D Tax Incentive NZ: What Businesses Should Do Now

Businesses considering an R&D tax incentive NZ claim should not wait until the end of the financial year to start organising their records.

1. Identify your current and planned R&D projects.
2. Document the technical problems and uncertainties being investigated.
3. Track employee time spent on eligible R&D.
4. Separate R&D expenditure from ordinary operating costs.
5. Review software development expenditure separately.
6. Maintain invoices, project records and testing documentation.
7. Check whether the $50,000 minimum expenditure threshold applies to you.
8. Review the proposed 2027–28 changes if your business has significant internal software or mining-related R&D.
9. Consider professional advice before submitting your claim.

R&D Tax Incentive NZ: Frequently Asked Questions

What is the R&D tax incentive NZ?

The R&D tax incentive NZ is a tax credit for eligible research and development activities and expenditure. The current credit rate is 15% of eligible expenditure, subject to the applicable rules.

How much is the R&D tax credit in New Zealand?

The current R&D tax incentive provides a 15% tax credit on eligible R&D expenditure.

What is the minimum R&D expenditure for the R&D tax incentive NZ?

The standard minimum is $50,000 of eligible R&D expenditure per year. There is an exception where eligible R&D is performed by an approved research provider.

What is the maximum R&D expenditure for the tax credit?

The standard maximum eligible expenditure is $120 million per year unless the business obtains approval to exceed the threshold.

Can startups claim the R&D tax incentive NZ?

Yes. A startup can potentially claim the R&D tax incentive if it satisfies the eligibility requirements for its entity, activities and expenditure.

Can software development qualify for the R&D tax incentive?

Yes, certain software development can qualify. However, specific rules apply to internal software development, administrative software and software developed for external sale or licensing.

What are the proposed R&D tax incentive changes for 2026?

The proposed changes include in-year payments, greater administrative flexibility, expanded mining R&D treatment and a reduction in the cap for eligible non-administrative internal software development from $25 million to $3 million.

When would the proposed R&D tax incentive changes apply?

Most of the proposed changes are intended to apply from the 2027–28 income year. The proposals remain subject to the legislative process.

What are in-year R&D tax incentive payments?

The proposed in-year payment system would allow eligible businesses to receive payments during the income year based on expected R&D tax credit entitlements, subject to the proposed rules and limits.

Can mining businesses claim the R&D tax incentive?

Mining businesses can potentially claim eligible R&D under the current rules, but specific exclusions apply. The 2026 Bill proposes expanding the range of R&D expenditure that mining businesses can claim from the 2027–28 income year.

Do I need to document my R&D activities?

Yes. Businesses should maintain records supporting their R&D activities, expenditure calculations and employee time allocations.

Can an accountant help with an R&D tax incentive claim?

Yes. An accountant or tax adviser can help review eligible expenditure, tax calculations, documentation and the broader tax implications of an R&D claim.

Related DFK Orb360 O’Halloran Resources

• Tax Advisory New Zealand
• Tax Expert NZ
• Outsourced CFO Services
• Small Business Accountants in New Zealand
• Contact DFK Orb360 O’Halloran

Official R&D Tax Incentive NZ Resources

• Inland Revenue – Research and Development Tax Incentive
• Inland Revenue – About R&D Tax Incentive Credits
• Inland Revenue – R&D Tax Incentive Eligibility
• Inland Revenue – Eligible R&D Expenditure
• Inland Revenue – Register for the R&D Tax Incentive
• Tax Policy – 2026 FBT Simplification and Remedial Measures Bill
• Tax Policy – R&D Tax Incentive Regulatory Impact Statements

R&D Tax Incentive NZ: Key Takeaways

• The current R&D tax incentive provides a 15% tax credit on eligible R&D expenditure.
• The standard minimum eligible expenditure threshold is $50,000 per year.
• The standard maximum eligible expenditure threshold is $120 million per year.
• Not every technology, software or product development cost qualifies.
• Businesses need appropriate evidence supporting their R&D activities and expenditure.
• Budget 2026 proposes quarterly in-year R&D payments.
• The proposed changes would also provide greater administrative flexibility around late filings and minor errors.
• The proposed internal software cap would fall from $25 million to $3 million per business per year.
• The proposed mining changes would expand the range of R&D expenditure that can qualify.
• Most of the proposed changes are intended to apply from the 2027–28 income year.
• The 2026 proposals remain subject to the legislative process.