Businesses that haven't yet made a profit will be eligible for more research and development (R&D) funding under the Government's tax incentive scheme.
Minister for Research, Science and Innovation, Megan Woods, made the announcement Friday, explaining how many businesses struggle to turn a profit despite investing in R&D.
"Right now, many businesses are investing in research and development but because they're yet to turn a profit... their access to tax credits under the Government's $1 billion R&D scheme is limited."
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Pre-profit companies that invest $2 million in R&D will now be entitled to get back $300,000 of that investment from the Government if they meet some broader conditions.
It's a jump from the maximum $250,000 available for pre-profit firms in year one of the scheme. The new boost will be available for businesses from the 2020-21 tax year onwards.
"A tax incentive in the form of tax credit benefits businesses in profit, but without refundability, it is of limited use for pre-profit businesses or businesses in loss," Woods said.
"The proposed changes aim to simplify [the R&D Tax Incentive] to ensure a pre-profit firm is able to get the financial support it needs to innovate and succeed."
The scheme - part of a wider package of support to boost business innovation in New Zealand - includes a tax credit rate of 15 percent for eligible expenditure, with a $120 million cap.
It also has a minimum R&D expenditure threshold of $50,000 per year - but with a promise that tax credit can be accessed more easily across all sectors, including the technology sector.
The latest changes were introduced in a proposed law Woods brought to Parliament in late June.
It followed her Taxation (Research and Development Tax Credits) Act 2019 passed into law in early May 2019. Businesses at the time were urged to start recording their R&D expenditure in order to receive the tax credit.
Enrolment for the R&D Tax Incentive will open in July, through which businesses can register their intent to claim R&D tax credits and request further information.
Woods said the Government aims to increase New Zealand's R&D expenditure to 2 percent of Gross Domestic Product (GDP) over 10 years.
The Government's Budget this year included a new $300 million fund to help start-up companies grow and expand beyond the start-up phase.
It also included $106 million of operating funding over four years and $50.6 million capital to bolster innovation and sustainability in business to support a low carbon economy.