New Zealand Businesses Increasing R& D Investments: Start Ups To Get Tax Breaks For R&D Boost

New Zealand’s Science Minister Steven Joyce has welcomed the trend of businesses in New Zealand investing more in research and development for long term growth. This trend was highlighted in the latest data by Statistics New Zealand, which showed that business expenditure on research and development has increased from NZ $53 million in 2012 to NZ$1,246 million in 2014.

“This shows a strong run of growth in business research and development by New Zealand companies since the worst days of the Global Financial Crisis," Joyce said. Alongside the increase in business expenditure, the survey also indicated that the number of businesses that invested in R&D in 2014 has gone up to 1549, according to a press release by the Government.

Regarding the slight decline in business R&D as a percentage of GDP, the minister said it was due to the better than expected growth in the economy. Among the businesses, the greatest increase in R&D spending was noticed in services industry, especially in computer services, which emerged as the biggest spender on R&D. It spent NZ$311 million in 2014, up by 41 percent higher than the NZ$221 million in 2012.

Businesses also employed more fulltime equivalent researchers, technicians and support staff, whose numbers increased from 8,800 to 10,000, along with a general increase in researchers from 34,900 to 37,300.

However, some of the Government’s recent initiatives to encourage business R&D are yet to reflect in the performance figures, as these are figures of the 2013/2014 financial accounts of New Zealand companies and research organizations.

Growth Agenda

Among the notable Government initiatives include the new R&D growth grants administered by Callaghan Innovation, National Science Challenges and cash out packages for R&D tax losses.

According to the minister, the government is committed to encourage businesses from all sectors to increase R&D activity to create stronger R&D ecosystem within New Zealand as part of the Government’s business growth agenda. Strengthening business R&D and driving innovation will help Kiwi companies to compete and succeed on the world stage and ensure the fast paced diversification of the New Zealand economy.

R&D Cash Outs

Meanwhile, an upcoming Government bill will allow start-up companies to leverage their investment in research and development in terms of tax breaks. The bill has already passed its first reading in Parliament. The Taxation (Annual Rates 2015-16, Research and Development, and Remedial Matters) Bill envisages appropriate changes to the Income Tax Act to allow New Zealand companies to "cash out" the tax losses by qualifying the expenditure on R&D.

Under the provisions of the bill, start-up companies with a focus on R&D can access the benefit of their tax losses on a current-year basis than waiting for an indefinite future, reports Stuff.Co.Nz. Start ups will be supported by interest-free loans that are repayable when tax is paid on the company's future income.

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