Megan Woods: Supporting R&D out of the gate

Opinion 12/07/2019

By Megan Woods, Minister of Research, Science and Innovation, Labour MP.

One of the best things about being Minister of Research, Science and Innovation is the time I get to spend with New Zealand’s top thinkers and doers.

This week I was down at one of my favourite places – the Innovation Precinct in Christchurch, meeting with the team at Orbica.

Orbica are experts in geo intelligence. They do stuff like map crash records so Kiwi engineers can make our roads safer. Orbica, like many Kiwi businesses investing in R&D relied on grants and government support to get off the ground.

So this week we caught up for a bit of a celebration of the sector, and to announce the new way the Government is making it easier for businesses to invest in R&D.

Until now, if you’re investing in research and development, but are yet to turn a profit, access to tax credits has been limited. We’re turning that around, with broader cash entitlements to support eligible R&D for businesses not yet making money.

We know a lot of Kiwi companies investing in R&D don’t make money right away.

In fact, we know that some of our most impactful R&D activity is delivered by start-ups and pre-profit businesses.

That’s why we’re removing barriers to R&D investment.

Under our proposal, refundable tax credits would generally be available up to the amount of payroll tax paid by the business in the same year.

That means more money, made available sooner, to reinvest in R&D.

This Government has set an ambitious target of raising New Zealand’s R&D expenditure to 2% of GDP over 10 years. That’s no mean feat – which is why we introduced the R&D Tax Incentive in our first year on the job.

The R&D Tax Incentive is government’s biggest single investment in research and development in New Zealand’s history.

Our plans to extend eligibility for pre-profit and loss-making businesses is about making sure Kiwi innovators have the best possible start so they can increase their genuine investment in R&D and get out in front of their global competitors.

This will give Kiwi innovators the best possible start to increase genuine R&D investment.

For example, with our plans for refundability, a pre-profit start-up investing $2 million in eligible R&D would be entitled to get back $300,000 of its investment in cash, provided it met the broader conditions.

This is a significant addition to the range of supports for start-ups this Government will continue to back, including Callaghan Innovation’s incubator and accelerator programmes and the R&D Project Grants.

In developing this approach we have learned from international best practice how to incentivise R&D expenditure and retain trust and confidence in the tax system.

We already have amazing companies, like Orbica, producing leading-edge technologies.

We need more businesses increasing their expenditure on R&D.

Our policy meets the rigour of international schemes, and will grow innovation by supporting businesses to undertake genuine R&D.

I am confident that with the changes proposed it will help us to develop a more innovative and resilient domestic economy – for the benefit of all our people.

Megan Woods is Minister of Research, Science and Innovation and Labour Party MP for Wigram.